The head of Finance Ireland, which drastically reduced its home loan offering two years ago as interest costs soared, has ruled out a return to the mortgage market until “2025 at the earliest” as mainstream banks continue to enjoy a significant competitive advantage with cheap deposit funding.
Still, Finance Ireland is currently seeing very strong demand for car loans, opportunities in commercial real-estate lending and recovering activity in small-business leasing finance, chief executive Billy Kane told The Irish Times after a holding company over the group filed its 2023 financial report with the Companies Registration Office.
The lender issued less than €100 million of new mortgages last year, according to Mr Kane. That was down from €715 million in 2022, which had skewed towards the first half of that year before it was forced to hike rates as market and official European Central Bank interest rates started to soar.
Finance Ireland’s five-year fixed mortgage rate, for example, is 5.6 per cent for loans of less than 80 per cent of the value of a property. The same product costs about 4.8 per cent with AIB and Bank of Ireland, though banks have cheaper options for energy efficient properties.
Mr Kane said the banks “are actually cross-subsidising” their mortgage books with cheap deposit funding. More than 90 per cent of customers’ money in Irish banks is in on-demand or current accounts, which are earning little or nothing, even as they offer rates of up to 3 per cent on certain savings products.
The comments come as there are signs elsewhere of re-emerging competition from nonbank lenders in the mortgage market this year as market rates have dipped from their highs. ICS Mortgages has moved in recent months to lower interest rates and ease lending restrictions, while Moco, owned by Austrian bank Bawag, is making inroads into the market. Another start-up, Nua Mortgages, is eyeing an imminent launch.
UK-based financial technology group Revolut has also said it plans to launch of mortgages in the market in the first half of next year.
Finance Ireland’s mortgage portfolio – including loans that have been refinanced on international bond markets through a process known as securitisation – shrank by about €200 million to €1.5 billion as repayments outpaced new loans, according to Mr Kane.
The group’s total loans – including facilities held both on- and off-balance sheet – declined by close to 6 per cent to €2.61 billion.
However, the group’s car finance business had its “best year ever” in 2023 as it issued €280 million of new loans, according to Mr Kane. Net of repayments, total loans in the unit grew to €523.2 million from €474.5 million at the end of 2022. Activity in this segment has remained “very, very strong” so far this year, he said.
The company started to fund auto loans from its own balance sheet two years ago to maximise its growth potential. It previously used finance from UK merchant banking group Close Brothers for this business.
Mr Kane said the group’s commercial real-estate business, where the loan book remained stable at about €500 million last year, has seen some “good opportunities” in 2024 in the areas such as warehousing and out-of-town retail outlets and offices. This unit specialises in loans of as much as €20 million.
While SME leasing activity was muted last year, he said that it has picked up so far in 2024 as small firms have become more confident as interest rates ease.
The ultimate parent company of the group, FICS Group Holdings Limited, posted a €10.4 million pretax profit last year, according to the report.
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