Nest Egg: The changing landscape of Irish mortgages

The banking landscape is undergoing significant change in Ireland and only time will tell if it is going to benefit the consumer.

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.

It’s not that we are a large market for new entrants in the home lending space, but the demand here right now has rarely been as strong for home loans with massive pent-up demand to buy or move house.

The value of mortgages approved in April was the highest value for the month since records began in 2011. Some 4,362 mortgages valued at €1,089bn were approved in April 2021, according to a Banking & Payments Federation Ireland (BPFI) report. The number of mortgages approved rose by 98.3% compared with the same period last year when the country was in the first Covid-19 lockdown.

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. The heightened activity has been broadly welcomed. With the departure of Ulster Bank and KBC from the mortgage market, the presence of Avant and other non-bank lenders and their innovation, is essential for competition.

A 30-year fixed term mortgage offers a guaranteed level of mortgage repayments over the long term for those mortgage holders who opt for it. It means the mortgage product offering is catching up with our European & US counterparts when it comes to fixed rates – and overall better value on rates. 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.

Shares in the main two lending banks – AIB and Bank of Ireland – fell considerably during the week of the announcement, so the two main banking forces in Ireland will have to remain competitive to try keep their market share. However, with the current demand there should be plenty to go around for everyone and the consumer should benefit from a broader range of products at competitive prices.

Conor Martin - Tara Financial - Email: