Next year is expected to see a surge in the number of consumers switching their mortgage provider and further interest rate reductions as smaller lenders increasingly target customers set to be directly affected by Ulster Bank and KBC Bank Ireland exiting the Republic.
One broker said 2022 could be "the year of mortgage switching", with pressure building on the main lenders to cut their rates or risk losing customers.
Spanish-owned lender Avant Money – which was originally born out of US credit card provider MBNA - has announced its intention to cut its mortgage interest rates from next Thursday.
Avant said its fixed rates would be cut by up to 0.3% and that it is targeting first-time buyers in the main, due to their requirement for a higher loan-to-value mortgage. The company is offering a three-year fixed rate of 2.20% at 90% loan to value.
Avant – which said switching customers could save thousands of euro moving to it – said it has also expanded its network of brokers, thus extending its lending reach countrywide.
“Avant Money entered the mortgage market with a mission to bring lower mortgage interest rates, innovative new products and long-term value giving real savings over the life of a mortgage,” said Avant Money’s head of mortgages Brian Lande.
Avant’s move follows news this week that Finance Ireland is reducing – from Monday – its long-term interest rates on its 10-, 15- and 20-year mortgages and introducing a 25-year fixed rate.
Welcoming the news, Joey Sheahan of broker My Mortgages said the cuts from Avant and Finance Ireland were “likely to resonate” with many mortgage holders who have, to date, been reluctant to switch provider.
“We predict that 2022 will be the year of mortgage switching,” Mr Sheahan said.
“While Ireland continues to have amongst the highest mortgage rates in the EU, this heightened level of competition is helping to reduce that stigma. The non-bank lenders are really putting it up to the high street banks to cut mortgage rates for all homeowners or face losing them as the number of people switching continues to grow,” he said.
Mr Sheahan said the onus was now on homeowners themselves to assess their current mortgage deal and see if there is a substantially better rate out there.
“For many, there definitely is,” he said.
The Association of Irish Mortgage Advisors said the planned rate cuts further increase competition in the market.
“These initiatives appear to be targeted at Ulster Bank and KBC Bank Ireland customers in particular,” said Goodbody analyst John Cronin.
“As we have previously noted, we expect continued rate compression as the market remains highly competitive, with new entrants leveraging the broker channel – which now represents over 40% of mortgage originations – to win share,” he said.