It was strike two in the mortgage market price war earlier this week as Halifax (formerly known as Bank of Scotland Ireland) slashed its mortgage rates, amid accusations by rival National Irish Bank (NIB) that its offer was a gimmick.
Homeowners lucky enough to have whittled their mortgage down to less than 50 per cent of their property's value can now benefit from a mortgage with no margin above the European Central Bank (ECB) base rate for the first year as a result of Halifax's move.
This means homeowners who switch their mortgage to Halifax can get an interest rate as low as 3.5 per cent for the first year. After that, the interest rate will revert to a rate of 4.4 per cent.
Where the mortgage is 50-75 per cent of the property value, the one-year discount rate is 3.7 per cent, reverting to 4.6 per cent, while anyone whose loan is more than 75 per cent of the property price (loan-to-value or LTV) is eligible for a one-year rate of 3.85 per cent, which goes to 4.75 per cent after a year.
But these non-discounted rates which kick in after after 12 months are higher than the interest rates that borrowers could get from other lenders who don't bother with a first-year discount.
NIB has hit back at Halifax's move by saying the one-year discount offer actually highlights the savings that can be made when customers look at their repayments over the life of their loan and not just the first year.
NIB's LTV Mortgage, which it launched last October, has a margin ranging from 0.5 to 0.59 percentage points over the ECB base rate.
Based on the current ECB base rate of 3.5 per cent, tracker mortgage customers will be charged rates as low as 4 per cent.
A margin of 0.5 points over the ECB base rate applies to the first portion of the loan up to 50 per cent of the property value.
A margin of 0.6 points is applied to the next portion of the loan, up to 60 per cent of the property value, while a margin of 0.8 per cent is applied to the final portion of the loan, up to 80 per cent of the property value.
The NIB mortgage is only available to borrowers where the mortgage does not exceed 80 per cent of the value of the property, which excludes most first-time buyers.
Halifax, however, will go up to 95 per cent of the property price for people who switch their mortgage to its books.
Thanks to the property boom, many homeowners have seen the proportion of their loan in relation to the value of their property fall, and even before the NIB and Halifax offers cheaper loans were available to people with lower LTV mortgages from almost all lenders.
NIB claims that a homeowner with a loan-to-value of 50 per cent will be €19,843 better off over the life of the loan with NIB than with Halifax, while a borrower with a 75 per cent LTV will save €35,374.
The bank labelled the Halifax deal "old thinking in banking", where customers are enticed by an introductory offer but then moved to a far less competitive rate.
"The Halifax offer is a good deal, but what you need to be doing is looking at the longer-term value, not the short-term discount," says mortgage broker Liam Ferguson of Ferguson & Associates.
However, the Halifax offer is the best rate available for someone who is taking the short-term view and is proactive about how they manage their mortgage, he adds. "They may be planning to sell in a few years' time if they want to trade up or switch their mortgage again."
Several lenders offer to pay the legal fees of customers who switch to them, although in some cases the borrowers must not move on again within five years - if they do, they will have to reimburse the fees, which can range from €900 to about €1,500.
Consumers are now regularly bombarded with advertisements for often complicated mortgage products, notes Ferguson. "It's almost reaching the point of information overload," he says.
While NIB claims to have received 20,000 inquiries about its LTV Mortgage over the past few months, figures showing how many of these inquiries have translated into customers have yet to be published.
Many homeowners don't actually follow through on their good intentions to get the best deal on what is often the most important and most costly investment of their lives.
Halifax's grand no-margin mortgage gesture has focused a lot of attention on its switcher rates and away from its new standard variable rate of 4.55 per cent.
This is the lowest standard variable rate in the market, and although there is nothing to stop it overtaking typical ECB tracker mortgage rates of 4.6 per cent at any time, for the moment the rate is looking like a very good deal for first-time buyers who are borrowing up to 100 per cent of the property price.
