ICS Mortgages is “actively considering” relaxing the owner-occupier lending restrictions it introduced last year, amid signs that the international bond markets, where the nonbank lender finances its business, are stabilising after recent volatility, according to the chief executive of the lender’s parent.
Fergal McGrath, chief executive of Dilosk, owner of ICS, spoke after the company raised €200 million this week refinancing a portfolio of buy-to-let mortgages on the bond market, through a process called mortgage securitisation. It followed a residential mortgage-backed securitisation (RMBS) deal in April where the company refinanced €500 million of owner-occupier loans.
ICS effectively pulled back on offering owner-occupier mortgages last summer as it increased rates and restricted mortgage lending to 2.5 times borrowers’ gross income, compared with the prevailing 3.5 times cap set by the Central Bank for most loans. The regulator has since increased the limit for first-time buyers to four times income.
Easing the ICS limit “is under very active decision now,” Mr McGrath said. However, he declined to say when a decision could be made.
“We never withdrew from this area of the market, but we curtailed the flow of business,” he said.
Mr McGrath said that this was down to the rapid rate at which central bank rates started to rise last year, difficulties nonbank lenders faced since then in raising finance in the capital markets at the right price, and mainstream banks’ “peculiar pricing” of mortgages as they sought to recapture market share ceded to alternative lenders that had entered the market in recent years.
Irish banks have lagged behind European peers in hiking mortgage rates as the European Central Bank increased official rates. They have essentially used cheap short-term deposits in the meantime to subsidise their mortgage portfolios.
Meanwhile, ICS has remained an active lender in the niche buy-to-let (BTL) mortgage market, even as this sector has been shrinking in recent years amid a wave of small-time landlords exiting the rental business. Mr McGrath estimates that ICS will be responsible for about €100 million of the €250 million of BTL business expected to be written in the State this year.
Mr McGrath said that some tranches of bonds on offer as part of the €200 million RMBS deal this week were more than six times oversubscribed by orders from investors. The top-rated bonds on offer were priced to effectively carry an initial interest rate of about 4.9 per cent, with the pricing of the rate on offer tightening as the bonds were being marketed.
