Return of ICS brings new options to the mortgage market
Ulster Bank and KBC are leaving but ICS is back and vying with Avant Money thanks to its low-rate broker-led loans
August 28 2021 02:30 AM
The entrance of ICS back into the domestic mortgage market reveals, once again, the agility of non-bank lenders over the “pillar banks”.
Once a sleepy building society for the civil service, in recent years it was bought by Dilosk and went after the valuable investor market instead.
But it’s back, and with broker-led loans starting below 2pc, is vying with Avant Money for a share of the PDH (private dwelling home) market.
But how does it shape up, and is going with a broker now the best option? What now for the industry following the departure of Ulster Bank and KBC? And is going green a path to a better deal, or just a gimmick?
Trevor Grant, chairperson of the Association of Irish Mortgage Advisors, says the good news for consumers is that the ‘sub 2pc’ loan is now the norm.
“The announcement by ICS delivering the lowest variable rate in the market (2.45pc), combined with the launch of market-beating rates and products delivered by Finance Ireland and Avant Money earlier this summer, has finally put a death knell on the outdated concept of consumers only approaching their existing current account provider and expecting them to deliver the best deal,” he says.
Avant Money entered the mortgage market last August, offering rates from 1.95pc exclusively through mortgage brokers, while they and Finance Ireland launched new long-term flexible fixed rate products earlier in the summer, up to 30 years. For those with equity in their homes to trade up or switch, finding a rate below 2pc is easy.
“This can only be viewed as good news for consumers,” says Mr Grant.
The second half of the year is ‘draw down’ time. All those mortgages bought since January must come to fruition now, or be reapplied for, under strict ‘approval in principle’ rules.
Banks are eager to see who’ll go ahead or not, as they want to use up their targets for exceptions (over 3.5 times income, or 90pc loan-to-value) permitted only for a small number of cases.
If they’re not going to get drawn down now (either because buyers can’t find a house, or they made multiple applications and are buying elsewhere), then it’s a good time to see if you qualify.
What they lack in size, they make up for in agility. You won’t get a full-service banking experience, but do you care? While bare sub-2pc rates are still higher than those charged by European banks, Irish providers don’t tend to charge large application fees, as is common abroad.
They’re also not, in the main, handling legacy debts, a loss-making tracker-mortgage loan book or under the ECB bailout cosh.
They don’t have to hold back the reserves in the same way as pillar banks, and because they’re broker-led, cases move quicker through the system, so buyers can find out what’s on offer, and complete the application smoothly. You may have to pay a modest broker fee for the leg work, but it’s worth avoiding the hassle.
Avant Money, ICS, Finance Ireland and even credit unions are examples of ways to secure a mortgage.
“They may not be familiar names to many mortgage seekers, who may be tempted to go to more well-known lenders such as AIB and BOI as their first port-of-call,” says Daragh Cassidy of financial comparison site Bonkers.ie.
“However recent developments clearly show that it is the smaller, newer lenders who are offering some of the best value right now and I would encourage any prospective homebuyer or switcher to consider these lenders for their mortgage.”
Given all new homes must have the highest BER rating, what’s the point of a special green rate for mortgages?
According to Martina Hennessy of mortgage broker Doddl.ie, the real saving is for those extending or retro-fitting existing homes.
"We are seeing a significant increase in mortgage holders looking to release equity in their home for improvements and extensions,” Ms Hennessy says.
“Those improving the energy rating of their home to B3 or above are increasingly securing one of the green rates currently on offer from lenders including Haven Mortgages, AIB, Ulster Bank and Bank of Ireland.
"If your BER is set to become more favourable due to home improvement works then lower green rates can mean that even when you release equity for works, your monthly repayment does not increase.
Someone on a variable rate of 3.15pc with an existing mortgage of €250,000 is currently paying €1,205 per month over 25 years.
Borrowing €25,000 extra for home improvement works, brings the total mortgage to €275,000. When eligible for a green rate discount, their rate would be 2.15pc with repayments of €1,186 per month.
So, is it ‘free’ money? With inflation tottering around 2pc, it really could be considered so. Coupled with pent-up savings, and zero interest earned on deposit, sometimes the lowest risk option for money is to spend it, or gear it by borrowing.
Green mortgage options
A number of banks now offer discounted rates for so-called ‘green’ mortgages. Generally this is where the BER is A or a high B. For those upgrading or retrofitting existing homes, it can be worth moving the entire loan, including the works’ loan, into one mortgage.
The following are rates assuming a €240,000 mortgage on a house valued at €400,000 (loan to value 60pc) with 25 years left to run.
AIB: Regular rate is 2.45pc for three-year fixed. Green rate is 2.15pc.
Bank of Ireland: Regular rate is 2.9pc for one-to-two-year fixed. Green rate is 2.7pc.
Ulster Bank: Yes, they are still offering home loans, although there’s no guarantee who will own it once they leave Ireland. Any fixed-rate contract must be honoured by the new owner. This is an example where fixing for a shorter period is more beneficial than a longer term. Their current regular rate is 2.2pc for two-year fixed and 2.35pc for five-year fixed. Their green rate is 2.25pc at four years.
PTSB: Will also offer 2.25pc over four years.
Non-Bank Lenders: For the same loan, ICS will offer 1.9pc for three-to-five years fixed. Avant Money will offer 1.95pc for three-to-seven years fixed while Finance Ireland has a three-year fixed rate of 2.25pc. Having a mortgage broker check the market may give better offers than going with the institution in which you ordinarily bank. See bonkers.ie or ccpc.ie.