low interest rates

The Irish mortgage market could be in for a severe shaking up if a prospective new lender receives Central Bank approval.

It is being rumoured that Frank Money, founded by former Danske Bank executive Colin Cunningham, is aiming to have mortgage rates of 2.8pc – almost 0.5pc lower than the best variable rates offered by the other lenders. The new lender will offer its products through brokers and there is much frustration that the Central Bank is taking so long to process its application for authorisation.

If, and when, it enters the market it could mean a saving of up to €3000 each year for someone with a €300,000 mortgage and a standard variable rate of 4.3%.

It would be likely that if Frank Money enters the market with such rates it will force the banks to lower their rates as well – something that the Government or Central Bank couldn’t achieve. The new lender is likely to target potential switchers with equity in their home, or new borrowers with substantial cash savings.

Frank Money, once it is authorised, will operate as a Retail Credit Firm which will allow it to give loans but not take deposits. The mortgages will be issued through brokers and their funding is expected to come from Irish and European Pension Funds. It will use one of the financial services firm, probably Capita, to administer and manage their mortgage book,

The current high variable rates have made it profitable for new lenders to enter the market. First-time buyers who get mortgage approval can expect to be charged between 3.2pc and close to 4.5pc. This is despite the record low ECB base rate of zero and the average standard variable rate in Europe is 2.05%. John Lowe the Money Doctor said “I welcome competition especially if it means consumers can save up to € 3,000 a year on a € 300,000 mortgage as result of a new entrant to the market. Better in your pocket !”

British-based mortgage provider Northview is also mulling an entry to the Irish market. Representatives of the Northview group, known until recently as the Kensington Group and which includes mortgage lender Kensington and mortgage servicer Acenden, have been meeting industry players in Dublin to run the rule over the sector in Ireland

The Australian group, Pepper has also announced recently that it will be entering the mortgage market later this year. You might remember Bank of Scotland entering the irish market in the same vein some 16 years ago… once bitten…


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