Plans by credit card firm Avantcard to offer mortgages for the first time may mean Irish home loan rates, which are among the costliest in Europe, will drop below 2%, a leading broker has said.
Avantcard said it will soon operate under Avant Money to sell mortgages for the first time in Ireland.
However, the new lender is giving few details on its planned pricing on home loan interest rates but says it will target switchers and first-time borrowers, which implies it will need to significantly undercut the rates offered by existing mortgage lenders if it is make any headway.
Avantcard, which for a number of years has operated a credit card facility from Carrick-on-Shannon in Leitrim, is a unit of Bankinter, a lender that already sells mortgages in its home country of Spain and in Portugal.
Avantcard here, it is also involved with Chill Money and An Post Money in providing personal loans and credit cards.
However, leading mortgage broker Michael Dowling said he understands the new Avant Money lender will indeed compete on price and offer fixed-rate loans across maturities at "sub-2%", signalling a potential shake-up of the mortgage market.
Despite the era of ultra-cheap wholesale funding for banks, households in the Republic continue to have to pay some of the costliest home loans in the eurozone, Central Bank surveys have repeatedly shown.
"My understanding is that it is a play on interest rates and as a new player the only way you can compete is to offer sub-2% fixed-rate loans," Mr Dowling said.
"It is a large bank making its intention known and it is only through lower rates can any new lender claim a stake," he said
Mr Dowling said a mortgage rate of bellow 2% was crossing "a psychological" barrier from a new lender that appeared ready to commit significant amounts of lending to the Irish mortgage market.
Existing lenders can easily lend in Ireland at below 2% given the amounts of cheap funding available to lenders, he said.
"Further details about the Avant Money mortgage, including information about interest rates, repayment terms and brokers will be made available by Avant Money in the coming weeks," a spokeswoman for Avantcard said.
"Over the years, we have seen how Irish consumers have been under-served in comparison to their European counterparts and it’s time for that to change," said its chief executive Chris Paul.
"Supported by our parent, Bankinter, and building on our strong consumer finance legacy, we are confident that we will be able to provide markedly better value for customers and deliver genuine, long-lasting change,” he said.
Trevor Grant, chairperson, at the Association of Irish Mortgage Advisors said the Avantcard plan was "fantastic news".
"It will invariably lead to increased competition and potentially better interest rates," he said.