Finance Ireland ‘temporarily’ pulls its most popular longer-term fixed-rate loans

Finance Ireland, the non-bank lender, said that it is “temporarily suspending” offering fixed-rate mortgages of 10 years or longer, amid heightened volatility on the international debt markets.

The lender, led by chief executive Billy Kane, last year introduced 15- and 20-year mortgages to the market as non-banks made a strong play for market share after Ulster Bank and KBC Bank Ireland decided to quit the Republic.

Finance Ireland’s fixed-rate mortgages of 10-years-plus are known to have been its most popular products for customers this year, as mortgage switchers and home purchasers sought to lock in long-term rates as bond market investors bet on a series of rate rises by central banks. The European Central Bank (ECB) has hiked its main rates by 1.25 percentage points since late July and is widely seen hiking rates again on Thursday by 0.75 of a point in an effort to rein in soaring inflation.

Finance Ireland had a 5.3 per cent share of the mortgage lending market last year.

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“Given current volatility on interest rates internationally, we have decided to suspend our longer-dated fixed-rate products – for periods of 10 years or more,” said a spokesman for Finance Ireland. “We plan to reopen applications for such products in due course when more normal markets return.”

The company will continue to offer variable mortgages and fixed-rate mortgages for periods shorter than 10 years, he said.

Commenting on Finance Ireland’s decision Rachel McGovern, director of financial services at Brokers Ireland, said: “This is a very worrying signal. Such good value products that give security over the longer term and enable mortgage holders to plan their financial outlay, while a feature of international markets for a very long time, have only been introduced into Ireland in recent years.

Non-bank lenders are much more exposed to market rates than mainstream Irish banks, which largely fund their mortgages from the deposits, where most savers are currently earning little or nothing on their money.

Finance Ireland relies on its 41 per cent shareholder, UK investment house M&G, for initial funding to write mortgages. It then typically refinances pools of mortgages in international bond markets, where the cost of funding has jumped in recent months.

Finance Ireland said that customers who have received an offer of a fixed rate of 10 years or more “will be processed as normal but new applications will not be accepted for the time being”. The spokesman declined to comment on how long the products could be withdrawn for.

The move comes within months of ICS Mortgages moving to temporarily restrict new home loans to 2.5 times borrowers’ gross income, compared with the 3.5 times limit set by the Central Bank for most loans.

The Central Bank decided last week to increase the ratio to 4 for first-time buyers from January. ICS also tightened its deposit criteria and hiked certain rates.

Meanwhile, Avant Money, the third non-bank mortgage lender in the Irish market, has also increased rates on certain products. The Spanish-owned company’s Irish mortgage book was €1.5 billion as of September, up almost 500 per cent on the year.

AIB, including its EBS and Haven subsidiaries, is alone among the Irish banks to have increased rates since the ECB first moved in July. It moved this month to add half a percentage point to the cost of new fixed mortgages.