Dilosk aims to double mortgage market share to 10%

Dilosk, the non-bank mortgage lender, aims to double its share of a growing Irish mortgage market to 10 per cent within three years, as it seeks to capitalise on the exits of Ulster Bank and KBC Bank Ireland from the market, according to its chief executive.

The company, which bought the ICS Mortgage brand and platform in 2014 from Bank of Ireland and ventured into owner-occupier home loans in 2019, expects to write €450 million of mortgages this year, compared to about €200 million in 2020, chief executive Fergal McGrath told The Irish Times.

His comments came after Dilosk raised €325 million last week refinancing a portfolio of mortgages on the international bond markets. As non-bank lenders do not hold customer deposits, they typically rely on the residential mortgage-backed securitisation (RMBS) market, where they issue bonds backed by income from mortgages, to fund their growth.

The latest Dilosk RMBS transaction is its fifth such deal and brings the level it has raised on bond markets since 2015 to more than €1.3 billion.

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Mr McGrath said buyers of the bonds "take some comfort in" the Central Bank of Ireland's mortgage limits, which are under review, having been introduced in 2015, adding that they were "good for the long-term stability of the market".

"My personal view is that house prices in Ireland would be higher if we hadn't the rules in place. They've created a level playing field among all lenders," he said, adding that the limits restricts lenders from loosening credit standards to grab market share.

Mr McGrath said Dilosk has a share of about 5 per cent of activity in the mortgage market, which banks and analysts expect to rebound to about €10 billion in new lending this year from €8.4 billion in 2020. Davy sees lending in the market jumping to more than €14 billion in 2023, fuelled by rising completions and the Government’s planned shared-equity scheme to help some first-time buyers.

The Dilosk executive said the company saw an “instant uptick” in inquiries earlier this year after Ulster Bank and KBC Bank Ireland signalled they were pulling out of the market. Mortgage brokers, a key channel through which Dilosk issues loans, are also growing market share of activity.

Owner-occupier sector

Dilosk started off by buying the ICS brand and an initial portfolio of €223 million of loans from Bank of Ireland. It has been offering buy-to-let loans since 2016 and moved into the owner-occupier sector in September 2019.

The company also bought €160 million of former GE Capital Irish mortgages in 2017 and acquired about €180 million of Irish loans from Leeds Building Society in 2018 as the UK lender quit the market. It manages about €1.12 billion of mortgages.

Non-bank lenders have so far been left out of the picture as AIB, Bank of Ireland and Permanent TSB negotiate to take over most of the loan books of Ulster Bank and KBC Bank Ireland. However, there may be a chance for non-banks to buy some of the portfolios if the mainstream banks are required by the Competition and Consumer Protection Commission to sell on parts of the loan books to secure regulatory clearance for planned deals, according to industry observers.