Bank of Ireland's new mortgage product could force buyers into more debt, broker says

A BoI branch in Dublin. Photo: Getty

Charlie Weston

The move by Bank of Ireland to give mortgage discounts to ­homeowners as long as they have some form of energy rating would force large numbers of buyers to take on more debt, a leading broker said.

Michael Dowling was commenting after Bank of Ireland said it was introducing what it calls an ­“EcoSaver Mortgage”.

This will have tiered discounted fixed rates for all properties with a Building Energy Rating (BER), from A to G.

At the moment, banks offer green mortgages that are lower than traditional rates, but only for homes that have a Building Energy Rating (BER) of B3 or higher.

EcoSaver Mortgages will be available to new customers and also to existing customers who move to the new product from another Bank of Ireland mortgage product, from Thursday, April 18.

A home with a BER that is assessed as G will get a 0.05 percentage point discount on a Bank of Ireland fixed rate.

For homes with an F rating, the discount will be 0.1 percentage points.

For E it is 0.15 points, while a home rated D gets a discount of 0.2 points.

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C-rated homes get a 0.25 percentage point discount, with a reduction of 0.3 points for a B rating.

And homes on an A rating will get a discount of 0.35 percentage points on a fixed rate.

Customers who take out an EcoSaver Mortgage will be rewarded for energy upgrades made to their property, with each BER improvement bringing a larger discount to the EcoSaver rate.

But Mr Dowling, of Dowling Financial in Dublin, said the new product discriminated against the majority of customers taking out mortgages because they would have little option but to buy second-hand properties.

“We know twice as many first- and second-time buyers who took out mortgages bought second-hand homes last year,” he said.

“Property prices continue to rise and not all mortgage holders will have the ability to raise debt to cover the costs of upgrading their homes.”

Mr Dowling welcomed the fact Bank of Ireland was now offering green rates to existing customers.

“However, while I may be swimming against the tide, this pricing is not fair and encourages people to take on more debt,” he added.

Bank of Ireland’s commitment to halve the carbon emissions of its mortgage book by 2030 was being paid for by its customers with second-­hand properties, he claimed.

He said that six out of 10 first-time buyers who bought second-hand homes last year did not qualify for the Help-to-Buy scheme or the First Home scheme and now paid more for their mortgage.

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