Avant launches new mortgage fixed for 30 years at 2.85% to 3.1%

[Brendan Burgess]

Press release attached.

10% annual overpayment allowed without early repayment fee.
Capped early repayment fee of 2% !

Avant Money offers mortgages across all residential home markets, including first time buyers, home movers and mortgage switchers, and are available in a wide range of locations:

• the five largest cities and their surrounding commuter belt (Dublin, Cork, Galway, Limerick and Waterford); and
• Athlone, Carlow Town, Dundalk, Kilkenny City, Portlaoise and Wexford Town.

If you move home...

Early redemption fee refunded if moving home & taking new mortgage with Avant Money within 12 months.

New mortgage at prevailing rates

This is different from Finance Ireland:
Remaining mortgage can be ported (rate & term) when moving home

Additional borrowing at prevailing rates

 

[Brendan Burgess]

Their existing range of shorter term mortgages stays in place

 

[Brendan Burgess]

Update: These are unusual mortgages for the Irish market in that the rate is fixed for the term of the mortgage.
A 30 year mortgage is fixed for 30 years. You can't take out a 30 year mortgage and fix for 20 years.
Likewise a 20 year mortgage is fixed for 20 years.

It makes the decision a bit more difficult.
Up to now, one would take the longest term possible and overpay the mortgage. Now if you can repay your mortgage in 20 years, you should choose a 20 year term as the rate is lower.

My initial reaction
I don't think you need to fix for 30 years.
15 years is probably long enough.
If you take out a 30 year mortgage at a rate of 2.25% fixed for 15 years, after 15 years, you will have reduced your mortgage balance by 40%.

So pay 2.25% instead of 2.85% and set the savings of .6% a year against your capital? That would reduce the balance owed after 15 years by about another 10%.

If you have a high LTV, don't fix for the long term

Fix at 2.35% for maybe 4 years and then when the LTV is lower, fix again.

When there are signs that mortgage rates might start rising again...
Consider fixing for a longer term then.

 

[nest egg]

Their existing range of shorter term mortgages stays in place

View attachment 5655

I note in the press release it's mentioned "I’m also delighted to confirm that we will be extending these new flexible features to all of our existing and new customers across our product range."

I would assume that to mean that if you're on an existing fix rate term, you can now overpay by 10%, does anyone see it differently?

 

[Bilbo1]

I note in the press release it's mentioned "I’m also delighted to confirm that we will be extending these new flexible features to all of our existing and new customers across our product range."

I would assume that to mean that if you're on an existing fix rate term, you can now overpay by 10%, does anyone see it differently?

In their website: go to the mortgages section

"Pay more, save more
10% annual overpayment allowance so you can save thousands, giving you the option to pay off your mortgage sooner.*"

 

[Itchy]

10% annual overpayment allowed without early repayment fee.
Capped early repayment fee of 2%

I like Finance Ireland's reducing rates as your LTV reduces. But I note that for early redemption fee that it will be repaid if you take out a new mortgage with Avant i.e. switch to a lower rate:

**To qualify, you must take out a new mortgage with Avant Money for at least the same amount, term, and within 12 months of redeeming your original mortgage. Subject to credit approval on the new mortgage.

Very encouraging if your LTV is >60%, you have scope to capture the reduced rates without switching fees. Seems like a great product offering, fair play to Avant.

 

[peemac]

Or a marketing blurb -
30 year Mortgage - €400 per €100,000 borrowed. (80% ltv)


Even if rates fell to 2% the difference is not so big that you'd regret it. I think its something that will give a lot of certainty to a large cohort of buyers.

 

[Brendan Burgess]

But I note that for early redemption fee that it will be repaid if you take out a new mortgage with Avant i.e. switch to a lower rate:

There are two sides to this coin.

While your LTV might have reduced and so you would get a lower rate, it's very likely that mortgage rates generally will be much higher in, say, 10 years. So you have lost the value of the fixed rate.

With Finance Ireland, you can keep the fixed rate, if you want. If market rates are lower, then you can switch.

Brendan

 

[Brendan Burgess]

I have issued a press release on it just now

Should borrowers fix for 30 years with Avant?

Briefing note by Brendan Burgess of Askaboutmoney.com



What rates are available from Avant after today’s announcement?

Avant Money mortgage range

Fixed term rates​
Fixed term range	60% LTV​	70% LTV​	80% LTV​	90% LTV​
Rate​	​	Rate​	​	Rate​	​
3 years	1.95%​	2.1%​	2.2%	2.35%​				​
4 years	1.95%​	2.1%​	2.2%	2.35%​				​
5 years	1.95%​	2.1%​	2.2%	2.5%​				​
7 years	1.95%​	2.1%​	2.2%	2.5%​				​
10 years	2.10%​	2.25%​	2.35%	2.65%​				​

One Mortgage​
Mortgage term	60% LTV​	70% LTV​	80% LTV​	90% LTV​
Rate​	​	Rate​	​	Rate​	​	Rate​	APRC1​
Up to 15 years	2.25%​	​	2.40%​	​	2.50%​	​	2.65%​	​
Up to 20 years	2.45%​	​	2.60%​	​	2.60%​	​	2.75%​	​
Up to 25 years	2.65%​	​	2.80%​	​	2.90%​	​	2.99%​	​
Up to 30 years	2.85%​	​	2.99%​	​	3.10%​	​	3.10%​	​

Should people fix for 30 years?

No one knows for sure, but probably not.

There is comfort in fixing for 30 years, but the premium is very high.

• A 7 year term is a lot cheaper and is enough insurance for most people
• Over the 7 years, most people will move into a lower LTV bracket with a lower mortgage rate due to house price increases and capital repayments
• Irish mortgage rates are artificially high due to our reluctance to allow lenders repossess houses. If we mature as a nation over the next 7 years and allow repossessions, rates should fall.

Let’s look at a first time buyer

		Yearly interest on a €300k mortgage	Yearly saving
30 year fixed rate 90% LTV	3.1%	€9,300
4 years fixed rate 90% LTV	2.35%	€7,050	€2,250
7 years fixed rate 60% LTV	1.95%	€5,850	€3,450

So fixing for four years will save over €2,000 a year. And at the end of that period, if the LTV has fallen , the savings would be even higher.

Fix for 4 years and use the savings to reduce the mortgage balance.

Should an existing customer of a cash-back lender with 60% LTV switch to Avant

Absolutely, Bank of Ireland and permanent tsb charge existing customers very high rates and compete for new business by offering cash back.

For example, if you are an existing customer of permanent tsb with a mortgage of €300k on a property worth €500k, the lowest rate you can get from permanent tsb is 2.95% fixed for 3 years.

You could save €3,000 a year by switch to Avant.

		Yearly interest on a €300k mortgage	Yearly saving
Permanent tsb 3 year fixed rate	2.95%	€8,850
Avant fixed rate for 3 years or 7 years	1.95%	€5,850	€3,000

By switching from permanent tsb to Avant, you would save €15,000 over 5 years, less about €1,500 legal fees in switching.

What about the lenders who don’t do cash back and so have much lower rates?

		Yearly interest on a €300k mortgage	Yearly saving
AIB 5 year fixed rate <50% LTV	2.35%	€7,050
Avant fixed rate for 5 years <60% LTV	1.95%	€5,850	€1,200

The case for switching is not as compelling. But even still, after about 15 months, you will have recovered the up front costs of switching.

 

[Wiresandmore]

Just rang a broker about this - confirming you can overpay by 10% on all the fixed rate plans too but you can only overpay once a year as a lump sum, no drip-feeding extra payments each month.

 

[Mocame]

Thanks Brendan for this really helpful information

 

[DublinHead54]

@Brendan Burgess , are you suggesting in your press release that there is no risk of house prices falling in the short to medium term? Whilst there is no increased rate for houses in negative LTV, house prices are not guaranteed to only go up over the short-term.

The biggest benefit of the 30 yr mortgage is complete protection against interest rises, for which you should pay a premium. It is clear the best deal from Avant is if you fall into the LTV buckets. Looking across Avant rates only the 30yr 90% LTV of 3.10% does look quite expensive vs the 2.25% (15 years 60% LTV) rate. However, if you compare across the market it is not that expensive a premium. For example, BOI 5yr fixed is 3%, so the premium is only 0.1%.

Interest rates, we've seen historic interest rates at 6% within the last 30 years. Taking a 30 year mortgage insulates yourself against interest rate rises, but you also miss out on potential savings. In the market up until now, we have been betting that we can get a better deal at the end of existing fixed rates due to house prices rising, rate decreases, and capital repayment.

I think buyers taking out 30 yr mortgages should really consider it.

 

[Brendan Burgess]

Over the 7 years, most people will move into a lower LTV bracket with a lower mortgage rate due to house price increases and capital repayments

@Brendan Burgess , are you suggesting in your press release that there is no risk of house prices falling in the short to medium term?

Hi Dublin Bay

No, I am not suggesting that. But I could see how you could read it like that.

If I release it again, I will change this wording
"Over the next 7 years the Loan to Value will fall as borrower makes capital repayments. And if house prices increase, the LTV could fall further."

Brendan

 

[NoRegretsCoyote]

Do Avant let you fix different portions of your mortgage for different terms?

If I was taking out a 30-year mortgage I would probably like to fix a part for the whole term. But not all. I wouldn't want to be stuck having fixed for thirty years if interest rates fall even more.

 

[Kilconleagirl]

its such a pity there aren’t brokers in more areas, am living in Kerry area, nearest broker is limerick and they won’t even entertain an application

 

[peemac]

its such a pity there aren’t brokers in more areas, am living in Kerry area, nearest broker is limerick and they won’t even entertain an application

I suspect that the others in the market will follow suit soon enough.
Banks are stuffed with cash, so if Avant get traction on these long term fixed rates, the others won't be far behind.

 

[Brendan Burgess]

its such a pity there aren’t brokers in more areas, am living in Kerry area, nearest broker is limerick and they won’t even entertain an application

Take a trip to the Circuit Court and watch the carry on in the Kerry repossession cases.

And even if the lender does get an order for possession, it would be very difficult to enforce the order.

And then it's difficult again to sell the house.

As a responsible borrower living in Kerry, you are paying the cost for tolerating this.

Brendan

 

[Kilconleagirl]

Take a trip to the Circuit Court and watch the carry on in the Kerry repossession cases.

And even if the lender does get an order for possession, it would be very difficult to enforce the order.

And then it's difficult again to sell the house.

As a responsible borrower living in Kerry, you are paying the cost for tolerating this.

Brendan

Sorry was not aware of kerry possession issues in the circuit courts, a least i know the reason avant are not represented in the county now, thanks

 

[Leper]

I am not au fait with the entire implications of the 30 year fixed rate mortgage. But, for the consumer this is an option not to be ignored or at least given some thought. If nothing else it is a start for some more eventual concessions.

My mortgage repayment history:-
1. Time Period:- Twenty Years (strict).
2. Variable Rate.
3. At one stage the interest rate was as high as 19.75% per annum - our outgoings exceeded our income - locked car into garage, bought a second hand bike and even still struggled to survive every day never mind every week. (I remember when the interest rate was reduced to 13% which was considered by us as a huge relief).
4. Bank refused point-blank to extend period of our mortgage loan and demanded immediate return of our cheque books (and our payments were fully up-to-date).
5. Even before the mortgage was "made available" to us we had to pay high interest on a Bridging Loan (for the entire amount of the mortgage) for twelve months and hope our mortgage would be processed sooner, but it wasn't in the "interests of the bank" to do so.

Now there's a 30 year fixed rate mortgage available - Why wasn't I born forty years later?

 

[cremeegg]

Leper is the only poster who gets the point here.

3% fixed for 30 years is a great opportunity.

It is a one way bet. Variable rates may average as much as 1% or even 2% below this 3% over the next 30 years, but that is the worst that could happen. On the other side rates might average 5% or 10% or as Leper says even touch 19%.

This is the best mortgage offer since the trackers.