A typical KBC Bank Ireland mortgage borrower will be left more than €2,000 a year worse off if their loan is sold to Bank of Ireland and they go to fix a new interest rate after, a consumer advocate has told competition regulators scrutinising the sale.

The sale of KBC’s Irish mortgages is currently being assessed by the Competition and Consumer Protection Commission (CCPC), which has sought submissions on the implications of the deal.

"The exit of KBC from the Irish mortgage market will seriously reduce competition and will lead to even higher mortgage rates,” Brendan Burgess, founder of the Askaboutmoney consumer finance website, said in his submission.

If the deal goes ahead it should only be on condition BoI operates the KBC assets at arms length or the bank commits to no longer offering cash-back mortgages and to offer the same lending rates to new and existing customers, Mr Burgess said.

Otherwise existing KBC customers will pay much higher rates on their mortgages, he said.

A sale would not trigger immediate changes to customers’ mortgage rates, but he argued they would potentially face higher interest in future, including when their current two, three and five-year fixed rate mortgage periods expire.

He cited the example of a typical KBC customer with a less than 80pc loan to value on their €300,000 mortgage and whose fixed rate is due to expire today. They could fix again for three years at 2.3pc with KBC.
But they face paying an additional 0.7pc of interest if their loan is with BoI, adding €2,100 in additional interest each year, he said.
Customers would have the option to switch to another provider, if they qualified for a new mortgage approval, but that is more complicated and would also require legal work to secure the home loan for the new lender.

The planned takeover by Bank of Ireland of KBC Bank Ireland’s €9bn in performing assets is currently being scrutinised by the competition watchdog.

The CCPC so called ‘Phase 2’ investigation, which could take more than four months to conclude, is an unexpected obstacle in the consolidation of the Irish banking system as foreign-owned KBC and Ulster Bank exit the market.

Mr Burgess said that if KBC is leaving it is better that the mortgage book be taken over by an active lender (such as BoI) than by a fund.

The KBC sale is happening at the same time as Ulster exit the market and will leave just three retail banks in Ireland, a level of concentration that is unusual in most sectors of the economy and doubly so given the State’s bank shareholdings.

While non-bank lenders such as Avant, Dilosk and Finance Ireland are providing some competition in mortgages, their combined market share is less than 10pc.

Belgian-owned KBC Bank Ireland announced in April that it intended to leave the Irish market and was entering into a memorandum of understanding to sell its performing consumer banking business to Bank of Ireland.

AIB closed a deal to acquire Ulster Bank’s €4.2bn book of performing commercial and corporate loans, while Permanent TSB is negotiating terms to take over €7.6bn in mortgages, SME loans and Ulster Bank’s asset finance business. NatWest could take a stake in PTSB as part of the arrangement.

Those deals will also require CCPC approval.