National Irish Bank has launched a new mortgage product which it claims will bring substantial savings to thousands of home owners.
The product, called the LTV (loan to value) Mortgage, links the interest rate to the value of the property. NIB claims that in some cases its margins will be less than half of what many mortgage holders currently pay. The margin is the amount above the European Central Bank rate charged by the banks.
NIB says that most standard variable mortgage rates are charged at a rate around 1.35 points above the ECB rate. NIB says it will offer a margin of 0.5 to 0.59 points depending on the home owner's loan to value.
The bank says its new product will be particularly attractive to home owners who have built up equity in their home.
The new structure is available on mortgages of up to 80% loan to value (where the customer already owns 20% of the home). A margin of 0.5 points will be applied to the first portion of the mortgage up to 50%, 0.6 points up to 60% and 0.8% up to 80%. NIB claims savings for many people could be more than €1,500 a year. It will apply to NIB's ECB tracker and two-, three- and five-year fixed rate products.
Andrew Healy, NIB's chief executive, said many people were still paying the same interest rate as when they first took out their mortgage, even though the value of their home may have increased substantially. Customers will also be able to receive a new valuation every three years to determine their loan to value.
