Homeowners face a €587 a month hike as they roll off their fixed rate mortgage

Avant Money’s head of mortgages sees huge cost shocks in store – and his firm is positioning itself to take advantage of situation

Around €9bn worth of mortgages are set to roll off of relatively low fixed rates in the next three years and onto higher ones, according to an analysis of Central Bank data.

The analysis by Avant Money, a lender based in Carrick-on-Shannon, Co Leitrim, showed the average rate for those with fixed-rate mortgages expiring in September across Ireland was 2.9pc.

According to Avant Money’s market estimates, these mortgage holders face higher rates, which could range from 4.7pc to 7.15pc.

Those rolling off of a 2.9pc mortgage of €250,000 with 20 years left and onto one at 4.7pc could end up paying €235 more per month, or €2,816 per year. If they roll onto a 7.15pc mortgage, they could pay €587 more each month, or €7,041 yearly.

In an interview with the Sunday Independent, Brian Lande, head of mortgages at Avant Money, and Stephen McCormick, commercial manager at Avant Money, said many people were facing a “massive payment shock”.

“We see a massive pot of opportunity for customers to be saving money,” said McCormick. “Switching mortgages for most mortgage holders is the single biggest thing you can do to save the most amount of money.”

Based on Central Bank of Ireland data from September 2023 and Avant Money’s estimates, the €9bn represents almost 66,000 mortgages. With many being joint mortgages, it could represent 130,000 people.

Around 4,000 mortgages will roll off by September this year, Avant says, with the remaining 62,000 rolling off at some stage before September 2026. The total balance of mortgages rolling off by this September stood at €516m.

Avant Money entered the Irish mortgage market in 2020, offering lower interest rate mortgages than its competitors.

‘The overall mortgage market in 2023 finished at €12.1bn, down on €14.1bn the year before’

While its rates have increased in the years since as the European Central Bank’s interest rates rose in the aftermath of the pandemic and Russia’s war in Ukraine, the Co Leitrim-based firm has benefited from Spanish parent company Bankinter’s access to cheaper debt through its ECB banking permit.

Total lending, including mortgages and consumer loans, by Avant Money hit €3bn last year. Its mortgage book stood at €2.2bn at the end of last year, up 41pc, despite a slowdown in the pace of growth at its new mortgage business as higher interest rates sapped switcher appetite.

Lande said Avant Money currently aims to grow its share of the mortgage market to 10pc by 2025/26, up from just over 6pc last year.

“In getting there, we would have always seen that we would effectively be replacing the type of market share that either Ulster Bank or KBC has. We have effectively become the fourth player.

“That strategy is very much in train and going to plan.

“As we move forward, the overall mortgage market in 2023 finished at €12.1bn, down on €14.1bn the year before. That was largely because switchers left the market – they felt it was the wrong time.

“We see the market this year as likely to be the same size, although if switching returns, we can see that the market will grow in 2024. The only question would be by how much.”

Lande said that since the start of the year, Avant had experienced a “huge upsurge” in switchers as they hit their roll-offs at other mortgage providers.

Regarding its plans to secure 10pc of the mortgage market, Lande said the market currently consists of 62pc first-time buyers, 26pc those moving homes, and the remainder switchers. He added that its share of the switcher market is likely to be higher than most.

“We won’t be too far off that mix,” Lande said. “Give or take, half of our customers will be first-time buyers, quarter movers and another quarter switchers.”

Looking at parts of the mortgage market it hasn’t entered, Lande said Avant is not considering offering a buy-to-let option at the moment.

Lande acknowledged that competition is another core consideration for Avant Money. He said the three banks had kept mortgage rates low, taking advantage of their ability to access cheaper debt. This had negatively affected the non-bank sector in the past year. However, Lande said other entities are launching or relaunching, citing the examples of ICS Mortgages and MoCo.

There was also a question about Revolut’s potential to enter the mortgage market.

He added there was an expectation in the market that the credit unions would look to enter a co-ordinated mortgage plan.

With Avant Money having increased its rates in 2023, Lande said it had “no particular plan to change rates either up or down”.

“What we are seeing at the moment is that the increases in the official ECB rate have stopped, not fallen. That is giving everyone a period of stability,” he said.

‘For us competing in the market, we will be very keen to see what others do first’

“The Irish banks and Avant Money only increased rates by, on average, 1.5pc from bottom to top, whereas the ECB rate increased 4.5pc.

“I think interest rates will come down, official rates. The general economic sentiment is that they will, so the question is when and how much.

“The question then is will banks be fast or slow to reduce mortgage rates,” he added.

“They were slow to bring them up, but will they be slow to bring them down? We don’t know.

“For us competing in the market, we will be very keen to see what others do first. We will be watching them carefully to see where we stand in our proposition.”

Another critical change for Avant Money had been the introduction of its direct channel mortgage offering. The lender had been broker only up until recently.

Currently, Lande said one-third of mortgage applications are coming through its direct channel.

“In the previous 24 hours, we have had hundreds of customers getting a mortgage estimate. That has been an extraordinary success for us to date.

“Our hope is that will easily get us to that 10pc market share.”

In December, Avant Money announced a simplified mortgage switching process and switching incentive for customers, reducing the number of documents required.

Source: Sean Pollock, Irish Independent 18th February 2024