EBS increases value of cash it will give back to new mortgage customers

It is offering 2pc back to customers on variable and fixed rates on draw-down and 1pc five years later.

This is similar to the deal Bank of Ireland offers.

But research has questioned the value of cash-back deals, with consistent calls for these incentives to be banned.

Lenders are competing hard for mortgage business as buyers are being squeezed out of the market by their inability to meet Central Banking lending limits.

House prices have risen so strongly that many are being priced out of the market by the rule that they can only borrow three-and-a-half times their earnings.

EBS was previously offering 2pc of the value of the mortgage drawn down in a bid to attract borrowers.

It has now upped this to 3pc if the borrower stays with it for five years.

The lender, which is part of the AIB group, said this was worth €9,000 in cash back on a €300,000 mortgage, or €12,000 on a €400,000 mortgage.

EBS Managing Director Des Fitzgerald said: “The enhancement of the cash-back offer along with EBS’s low fixed mortgage interest rates of 3pc for one to five years, means that first-time buyers and customers who choose EBS for their mortgage have an excellent value proposition in helping them find their home.”

The offer of 3pc cash back is available to customers taking out new fixed or variable rate mortgages on private homes in Ireland, including first-time buyers, customers moving to a new home, and customers who wish to switch their mortgage to EBS.

Opting for a cash-back mortgage could end up costing borrowers €30,000 more over the life of their mortgage, and younger and less-educated borrowers are more at risk of choosing more expensive cashback mortgages, a recent study found.

Cash-back mortgages have increased in popularity in recent years, with lenders such as Bank of Ireland, Permanent TSB and EBS offering a proportion of a mortgage back in cash.

Research from Trinity College Dublin assistant professor Michael King and Anuj Pratap Singh found that average € 300,000 cash-back mortgage would be more than € 30,000 more expensive for the borrower over 30 years.

This works out at €26,207 once the cash-back incentive is deducted, due to the higher interest rates charged on cashback mortgages compared with a standard product.

But the paper found customers can use the cash-back offers to their advantage if they switch regularly.

A bill published by Fianna Fáil seeks to ban cash-back offers, while consumer advocate Brendan Burgees argues that the incentives are keeping mortgage rates artificially high in this country.