Finance Ireland, the non-bank lender, said it was “temporarily suspending” the supply of fixed-rate mortgages of 10 years or more, amid heightened volatility in international debt markets.
The lender, led by chief executive Billy Kane, introduced 15- and 20-year mortgages to the market last year as non-banks played an important role in gaining market share after Ulster Bank and KBC Bank Ireland have decided to leave the Republic.
Finance Ireland’s 10+ year fixed rate mortgages are known to have been its most popular products with customers this year, as mortgage buyers and homebuyers sought to lock in long-term rates as bond market investors bet on a series of rate hikes by central banks. The European Central Bank (ECB) has raised key rates by 1.25 percentage points since late July and is widely seen as another rate hike of 0.75 points on Thursday in a bid to contain soaring inflation.
Finance Ireland held a 5.3% share of the mortgage market last year.
“Given the current volatility in interest rates globally, we have decided to suspend our longer-maturity fixed rate products – for periods of 10 years or more,” a spokesperson said. FinanceIreland. “We expect to reopen applications for these products in due course when more normal markets return.”
The company will continue to offer variable mortgages and fixed rate mortgages for terms of less 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. These value-for-money products that provide longer-term security and allow mortgage holders to plan their financial expenses, although they have long been present in international markets, have only been introduced in Ireland than in recent years.
Non-bank lenders have far more exposure to market rates than traditional Irish banks, which largely fund their mortgages from deposits, where most savers currently earn little or nothing on their money.
Finance Ireland relies on its 41% shareholder, the British investment company M&G, for the initial financing of the underwriting of mortgage loans. It then typically refinances pools of mortgages in international bond markets, where the cost of funding has surged in recent months.
Finance Ireland said customers who have been offered a fixed rate offer of 10 years or more “will be treated as normal but new applications will not be accepted at this time”. The spokesperson declined to comment on how long the products could be withdrawn.
The move comes months after ICS Mortgages decided to temporarily limit new home loans to 2.5 times borrowers’ gross income, up from 3.5 times the limit set by the Central Bank for most loans.
The Central Bank decided last week to raise the ratio to 4 for first-time buyers from January. ICS has also tightened its deposit criteria and raised some rates.
Meanwhile, Avant Money, the third largest non-bank mortgage lender in the Irish market, has also raised rates on some products. The Spanish company’s Irish mortgage portfolio stood at 1.5 billion euros in September, up almost 500% on the year.
AIB, including its subsidiaries EBS and Haven, is the only Irish bank to have raised rates since the ECB’s first intervention in July. It decided this month to add half a percentage point to the cost of new fixed-rate mortgages.