Mortgage competition heats up with introduction of 30-year fixed rates

Spanish-owned lender Avant Money will offer fixed rates of between 2.25% and 3.16% on fixed-rate mortgages covering terms of 15, 20, 25 and 30 years

Bank of Ireland is lowering its non-performing loan exposure.

A second lender in little over a month has promised the option of multi-decade fixed-rate mortgages in a bid to shake up competition in the wake of the decisions by Ulster Bank and KBC Bank Ireland to quit the banking market.

Hailed as “a step in the right direction for the Irish mortgage market”, Spanish-owned lender Avant Money has said it will offer mortgages with interest rates fixed for up to 30 years. 

It will offer fixed rates of between 2.25% and 3.16% on fixed-rate mortgages covering terms of 15, 20, 25 and 30 years. It marks the first 30-year fixed-rate mortgage product introduced in Ireland.

Last month, alternative lender Finance Ireland launched a 20-year fixed-rate mortgage for the first time in Ireland, saying it is targeting a 15% share of the home loans market.

Avant said it wants to be the fourth-largest mortgage provider after AIB, Bank of Ireland and Permanent TSB.

Broadly welcomed

The heightened activity has been broadly welcomed.

“With the departure of Ulster Bank and the potential departure of KBC from the mortgage market, the presence of Avant and other non-bank lenders and their innovation, is essential for competition,” said Association of Irish Mortgage Advisors (AIMA) chairperson Trevor Grant.

“Not only does a 30-year fixed term offer the promise of a guaranteed level of mortgage repayments over the long term for those mortgage holders who opt for it, it also represents a step in the right direction for the Irish mortgage market. We are catching up with our European counterparts when it comes to fixed rates – and overall better value on rates,” said Joey Sheahan of MyMortgages.ie.

Other lenders will now find themselves under pressure to develop and offer better mortgage products so as to remain competitive.” 

Competition is expected to widen further, with An Post planning to start selling mortgages next year and digital payments company Revolut confirming it will apply for a full Irish banking licence, which could eventually see it offering mortgages to Irish customers. However, both are likely to do so, as part of a partnership and underwriting structure, with an existing bank or financial services provider.

Shares in the main two lending banks – AIB and Bank of Ireland – fell considerably. Bank of Ireland shares were down by over 5%. It announced further action on its non-performing loans, saying it had agreed to securitise a portfolio of non-performing mortgages.

The loan portfolio being offloaded has a gross value of about €350m. Bank of Ireland said the deal should reduce the percentage of non-performing assets in its loan book to about 5.3% from 5.7%. 

Central Bank figures this week showed a fall in the total number of mortgage arrears, but a rise in the number of restructured mortgages, indicating borrowers are struggling to meet their scheduled repayments.