Avant Money to enter the Irish mortgage market - East Coast FM
Consumers in Ireland continue to pay some of the highest mortgage rates in comparison to some of our European counterparts who pay almost half what we're accustomed to.
This is largely down to a severe lack of competition in the Irish mortgage market, among myriad other factors.
However, the announcement of a new entrant into the market here is sure to help shake things up and provide much-needed choice for consumers in the weeks and months ahead.
Our head of Communications at bonkers.ie, Daragh Cassidy joined Declan Meehan on The Morning Show to discuss the arrival of Avant Money onto the Irish mortgage scene, as well as the growing possibility of a mortgage rate war as a result.
Here’s an outline of the main points discussed by Daragh in the interview.
What’s happening with interest rates?
Interest rates have been very low over the past few years. The European Central Bank sets interest rates here and has kept them very close to zero. In some cases, interest rates are set below zero to try and stimulate the economy.
Unfortunately, that does mean that banks are now being charged themselves for holding money with the European Central Bank. That cost is then being passed onto consumers.
Usually when we talk about lower interest rates, some think it’s a good thing - people think about their mortgage rate going down and personal loan rates going down.
However there are some negative consequences with lower interest rates, which often don’t get discussed. One is the lower rates that savers get, but now some savers are going to be charged negative rates.
Bank of Ireland
Bank of Ireland has just announced that it’s going to charge pension savers a fee of 0.65%, starting from September, for cash that is held in pension funds.
When people save for their pension over 20-40 years, they can choose to save in a wide variety of different investments. They can save in stock, bonds, property, etc., but often money will also be kept in deposit accounts where it’s held as cash.
Over time, this investment would make a little bit of money and be considered a risk-free investment. When people move towards the end of their pension savings and towards their actual drawdown date, more money is usually put into a cash fund to reduce risk.
Now Bank of Ireland will charge people for this cash that’s held in pension funds. They’re the first bank to do this, but more may follow in their footsteps.
People will also be charged the usual fund management fee on a pension, which can be anywhere from 1-2% in addition to this.
Avant Money’s mortgage offering
Mortgage rates here are too high, they’re about double the Eurozone average. A lot of that is down to the lack of competition in the Irish mortgage market, as it’s very much concentrated in the hands of a few banks.
There’s been a lot of talk of new entrants coming in. An Post has been quite vocal about its intentions to enter the market and team up with a foreign player. But actually, it’s AvantCard that’s taken people by surprise and announced that it’s going to enter the mortgage market here over the coming weeks.
AvantCard is now going to trade as Avant Money and will offer mortgages through the broker market. Avant Money is owned by a big Spanish company called Bankinter.
Avant Money has announced that it will offer mortgage rates of below 2%, which will really shake things up in the Irish mortgage market.
In general, the rates for a new mortgage customer would be 2.5-3% in Ireland.
The lowest rate at the moment in Ireland is 2.2% from Ulster Bank. To get this rate, you need to be taking out a mortgage of over €300,000 and you need to have a deposit of over 20%. So this wouldn’t apply to the vast majority of first-time buyers or switchers.
Recent mortgage news
Since this interview, there have been several developments so far this year concerning mortgage offerings in Ireland:
- Avant Money launched in Ireland in September with low rates of 1.95%.
- In April, Avant Money decided to expand its low-cost mortgage rates to a range of new locations.
- In May of this year, Finance Ireland announced that it was to offer the country’s first 20-year fixed-rate mortgage.
- Shortly after, Avant Money introduced Ireland's lowest 10-year fixed rate and in June, the lender came out with a new 30-year fixed-rate mortgage loan.
We recently discussed the latest mortgage news in an episode of our bonkers.ie podcast, Mortgage Movement.
Compare mortgage rates
Did you know that you can compare mortgage rates on bonkers.ie?