International bank Investec, which already offers savings accounts here and provides stockbroking services, aims to provide mortgages in what will be a massive boost for the struggling property lending market.
It will be the first new lender to enter the market since the financial collapse in 2008.
Investec will offer variable mortgage rates that would be among the lowest – and the increased competition that results could force a lowering of variable rates across the board.
One source familiar with Investec’s plans said the bank would be well able to compete by offering low variable rates as it was not burdened with the legacy of loss-making tracker mortgages.
The bank’s initial focus will be on the rising property market in Dublin.
But the 300,000 mortgage-holders currently on punitive variable rates with other banks will be unable to move to the new lender if they are in negative equity.
However, fierce competition for first-time buyers could have the knock-on effect of forcing down variable rates for new and existing borrowers.
The current high variable rates have made it profitable for new lenders to enter the market.
At the moment, a first-time buyer who gets mortgage approval can expect to be charged between 4.5pc and close to 5pc. This is despite the record low ECB base rate of 0.5pc.
Investec plans to use mortgage brokers as it does not have a branch network here, and hopes to be operating by the end of this year.
It is understood it has a fund of between €250m and €350m, which would give it 10pc of the new mortgage market if it maximises its approvals.
Investec has been building up its brand here and now sponsors the Monaghan senior GAA team, while Ireland and Lions rugby star Jonny Sexton is an “ambassador” for the bank.The lender has been here since 2000, when it took over corporate bank Gandon.
It is quoted on the London andJohannesburg with a market value of €4.22bn. It bought NCB Stockbrokers in January last year for €32m.Investec Ireland chief executive Michael Cullen told the Irish Independent: “Investec is always looking at opportunities to increase its footprint in the Irish marketplace, and as part of that regularly undertakes assessments of opportunities within the corporate and retail banking markets.”
Pepper Australia has already said it is looking at offering home loans here.Pepper boss Patrick Tuttle said the company will “consider originating new mortgage business in Ireland, marketing conditions permitting, thereby helping to rebuild a competitive marketplace and broaden the choice of options for Irish consumers”.Michael Dowling of the Independent Mortgage Advisers Federation welcomed the Investec move, saying it would put pressure on existing banks to lower their variable rates.
Despite banks’ promises of more mortgage lending, the latest figures show that 550 fewer mortgages were issued in the first six months of this year compared with the same period last year.
Bank of Ireland last month launched a €2bn fund to provide residential mortgages. AIB, which includes EBS and mortgage broker Haven, said it is lending to home buyers. Permanent TSB and Ulster Bank said they were getting back into the home loan market. And KBC Bank recently relaxed some of its lending criteria for residential mortgage borrowers.
But only 5,297 mortgages were issued in the first half of the year – half of what experts said was needed to meet demand.
The entry of a new lender comes after figures from the Central Statistics Office showed the first annualised increase in national property prices for more than five years in June.
The average mortgage being taken out is €160,300, down slightly from last year. This compares with first-time buyer loans averaging around €240,000 during the boom.
The Irish Brokers Association’s Ciaran Phelan said banks burdened with massive losses were reluctant to lend.
“The level of lending is still only a fraction of what it should be to support a ‘normal’ property economy. Realistically, we would like to see greater competition in the market, volumes hitting at least €5bn per annum which is about double the current levels.”
By Charlie Weston Personal Finance Editor