First-time buyers and mortgage-holders alike should care about the State firm’s plans
I can get a mortgage with my stamps now?
Well not now, but An Post has a plan which will see it enter the Irish mortgage market next year.
Why should I care about that?
If you have a mortgage or plan to get one soon the rates they are promising to offer might make you care a lot. An Post has said it will offer rates of 1 per cent less than what is on offer on the wider Irish market and will make its new products available to both new and switching mortgage-holders.
A 1 per cent discount? What does that mean?
A rate cut of 1 per cent on a €300,000 mortgage could save you as much as €60,000 over the lifetime of a 30-year loan.
That’s a lot of money. How can An Post afford this move?
It is widely recognised that mortgage rates in Ireland are far too high and Irish lenders have been widely criticised for charging rates wildly out of line with euro zone averages as they have sought to repair loan books badly hit by the financial crisis. According to figures from the Central Bank, the average rate of interest on a new home loan in the Republic in July was 3.2 per cent, while the average across the euro zone was put at just under 1.8 per cent. But An Post has a clean slate so may be in a position to offer better value to Irish borrowers.
Where is it getting its money?
We don’t know as of yet. An Post does not have a banking licence so will start offering the mortgages as part of a joint venture with an as yet unnamed partner. More details of its proposals will be made available before the end of the year.
Why is An Post getting into this market?
Because their traditional business model is dying as people rely on post offices less and less – last month, it announced that 159 post offices across the State will close in the months ahead as part of a restructuring plan.
So what is it doing?
Last year it rolled out a current account with debit card facilities and it also plans to introduce additional banking services, including issuing credit cards and overdraft facilities. The company will also seek to provide more Government services, including the issuing of driving licences and ID verification services, and it will seek to exploit its ecommerce capability through the introduction of click and collect facilities – in commuter hotspots, for example – and easier return options.
If they start offering rates that are 1 per cent less than what is on offer from banks, won’t banks just cut their rates?
They might but they will be hamstrung by the bad debts still on the books, and of course they will remember what happened when Bank of Scotland came to town in the early part of the last decade and started a tracker-mortgage-fuelled price war.
Will it be easier to get a mortgage from An Post?
No. All Central Bank guidelines on deposits and earnings will have to be met.
So is it going to happen?
An Post says it will definitely happen but with no partner yet tied down and no negotiations over rates concluded it may or may not come to pass.
If An Post offers mortgages does that mean they will be backed by the State?
Absolutely not. The Government is likely to make sure that An Post’s mortgage business is decoupled from any State business it does. Though one unspoken advantage of having an An Post mortgage might be the fact that a State agency repossessing homes would be a political minefield.