Avant Money - new entrant

Let's imagine some utopian scenario that they offer 1.75% fixed for say 3 years, do ye think people would actually switch? I would obviously, but I'm in AAM! What about the people who have never switched and think you need to keep current/mortgage accounts at same institution?

I would save 60 pm if I moved to 2%, so 720 pa.

Is that worth it?

There would be legal fees.

I either wait until my current fixed-rate period is up, or pay a breakage fee.

If (and its a big "if") they offer cheaper rates - the first and most obvious people to target, are those on SVRs with the other small banks - which may partially explain PTSBs recent move to reduce rates. That said, the danger group of people may be the hardest to shift, given they haven't moved for cheaper rates to date.

Are BankInter awash with cash that they can't lend in Spain, to the extent that they are prepared to lend it at below market rates in a new marketplace, at a time where there are fundamental risks to the economy and Irish property prices? Its one thing entering the market, but it's another thing entering it in uncertain times, offering market breaking low rates.

Surely there are aware how difficult it is to get money back on a homeloan in Ireland, when things go wrong? That, in itself, justifies a higher risk premium than we see charged in other EU counties.

Let's not forget what happened to other Banks that previously entered the Irish Market and lent money at rates below the market.

Boyd said:

Let's imagine some utopian scenario that they offer 1.75% fixed for say 3 years, do ye think people would actually switch? I would obviously, but I'm in AAM! What about the people who have never switched and think you need to keep current/mortgage accounts at same institution?

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You can't underestimate the power of inertia or indecisiveness. The amount of posts on here, "should I fix at 3% for 3 years if interest rates are going down?" Well there's a 2.3% fixed for 2 years if you read the best buys? Mad stuff! At least the site is here to push the good word though. The more consumer activity (rather than inertia) the better for everyone. I can see the market going the way off the health insurance market, where people will become overwhelmed by the range of products on offer.

Itchy said:

I can see the market going the way off the health insurance market, where people will become overwhelmed by the range of products on offer.

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Hi Itchy

But a mortgage should be easier to understand? I find health insurance confusing. What is actually covered? What are the excesses?

But comparing rates is easier. Cash back makes it complicated. And fixed or variable is a factor.

But if you are paying 4.5% to Ulster Bank or Bank of Ireland, and Avant Money have a 2% rate, then it should be fairly clear.

Brendan

They are very strong on long fixed rates in Spain.

20 years and 30 years at 2.5%-3% apr.

That would be a game changer.
€400,000 mortgage costing €1680/month guaranteed for life (based on 3% - 30years Rate in Spain is under 2.5%)

Interesting piece on the impact of the Avantcard announcement on the mortgage market.

Amazing to think that we could be looking at sub-2% fixed rates in the near future.

Avantcard saw itself as a”disruptor” in the Personal Loans market when it launched loan products via Chill. It didn’t disrupt anything. (I’m not even sure what impact their own brand loan products are having on the market).

Avantcard now similarly sees itself as a disruptor in the Mortgage market by seeking to launch mortgages - via brokers. This will have limited impact, even if they manage to get to launch the mortgage product in a timely fashion. It’s the same formula that they tried with Chill, except now they are seeking to launch against an even more foreboding economic background.

A major problem they face is that they have no branches and accordingly are entirely reliant on contracted third parties to support and roll out their business proposition for them.

Far from straightforward.

Sarenco said:

Amazing to think that we could be looking at sub-2% fixed rates in the near future.

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Jayom75 said:

A major problem they face is that they have no branches and accordingly are entirely reliant on contracted third parties to support and roll out their business proposition for them.

Far from straightforward.

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I can see them offering a no frills(sub) 2% fixed rate mortgage but with a lot of additional fees passed on to the borrower. It may say 2% on the tin - and what a great marketing gimmick that will be - but the effective rate will be more in line with other providers.

We have to just wait and see.

A more natural model for mortgage pricing would be an admin fee upfront and a mortgage rate which would be generally higher for fixed rates than variable rates. Rates should be lower for lower LTV whether the rate is fixed or variable.

Irish banks have it backwards to confuse people. They give out loans with cash back? And the variable rates are kept at outrageous levels while the fixed rates are lower. And in many cases the rate for a 90% mortgage is the same as for a 40% mortgage.

So there is an opportunity to lend profitably and sensibly in this market.

It might be difficult to convince people that they should pay 1% up front rather than be paid 2% cash back.

Brendan

Looking at their rates in Spain, to get the best deal you must buy house insurance, life insurance, etc., from them.


10 yr fixed = 2.80%, but as low as 1.50% with conditions.

10-year fixed-rate mortgage: Here is an example of an APR mortgage offered by Bankinter, S.A., based on the following characteristics:
Mortgage amount: €150,000. Term of loan: 10 years (120 monthly repayments). APR: 2.32%. Monthly repayment for 10 years: €1,346.87. Final repayment: €1,347.22. Arrangement fee: 500 €. Total interest: €11,624.75. Interest rate: 1.50% (120 months). Monthly repayments. Total amount repayable: €167,849.11.

This APR has been calculated based on the following:
- Arrangement of life insurance for an amount of 150,000 Euros for 10 years for a 30-year-old person. Annual premium of €190.86. Renewable annual insurance.

- Home insurance policy with coverage of €100,000 plus home contents insurance for €30,000, and an estimated annual premium of €356.62. Renewable annual insurance.

- Appraisal costs: €249.56.

Interest rate subject to the borrower holding the following Bankinter products:

- Salary Account, Business Account or Non-Salary Account (discount of 0.50 percentage points).

- Life insurance covering 100% of the mortgage amount, taken out with Bankinter Seguros de Vida S.A. de Seguros y Reaseguros (discount of 0.60 percentage points).

- Comprehensive home insurance with minimum home contents coverage of €30,000 and structure coverage equivalent to the appraisal value of the property for insurance purposes, taken out with Línea Directa Aseguradora, S.A. and brokered by Bankinter, S.A., Operador de Banca-Seguro (discount of 0.10 percentage points).

- Pension plan/EPSV: have a pension plan/voluntary pension scheme in place with the company Bankinter Seguros de Vida, belonging to Bankinter, S.A. Group, for the entire term of the loan and make a minimum annual contribution to it of €600 (bonus of 0.10 percentage points).

These products are optional for the customer, but if they are not purchased the above rate (1.50%) will be increased by 1.30% corresponding to the sum of each of the products not purchased. Accordingly, if none of the conditions are met the fixed interest rate will be 2.80% (APR 3.24%). Monthly repayment for 10 years: €1,434.60. Final repayment: €1,435.18. Total interest: €22,152.58. Total amount repayable: €175,221.94. This APR has been calculated on the basis of taking out with Bankinter or a different provider the legally required home insurance policy for €100,000, with an estimated annual premium of €186.98, in addition to an annual maintenance fee of €45 for the current account required for collection of the repayments, the arrangement fee of €500 and appraisal costs of €249.56.

The monthly instalments (French repayment system) are the result of raising the coefficient (1 + interest) to the power of the number of outstanding instalments in the transaction multiplied by the interest, divided by (1 + interest) raised to the power of the outstanding instalments in the transaction, minus 1, all multiplied by the capital pending repayment ('interest' is understood to be the nominal interest rate offered divided by 12). The repayment obtained includes the amount of interest (result of dividing the interest rate by 12, multiplied by the pending capital) and amount repayable (result of subtracting the interest from the repayment).

Main 10yr fixed rate = 2.80%

Less discounts;

Current a/c: -0.50%
Life ins: -0.60%
House ins: -0.10%
Pension plan: -0.10%

So the 2.8% drops to 1.50%.

This is a nice summary

Protocol said:

Main 10yr fixed rate = 2.80%

Less discounts;

Current a/c: -0.50%
Life ins: -0.60%
House ins: -0.10%
Pension plan: -0.10%

So the 2.8% drops to 1.50%.

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I think this is very informative. A discount for cross selling makes sense but given they'll be running a limit banking service here I would think any discount would be modest.

As a new operation I think it would make sense for them to under cut existing rates by a modest amount. Be a market leader but avoid a massive influx of new business from day one. build up the operational experience and then, maybe, look to expand more aggressively. A similar approach was taken by bank of Scotland Ireland back in the day.

It might not set the world on fire but that 10 year fixed rate offering of 2.8% would look to be the cheapest (before cashback) on the Irish market if it were introduced.

While they might be able to offer (sub) 2%, with the current market structure and level of competition, there's no reason for them to go straight for it. Their introduction will be a (welcome) step in the right direction... But only a step.

Jayom75 said:

Avantcard saw itself as a”disruptor” in the Personal Loans market when it launched loan products via Chill. It didn’t disrupt anything. (I’m not even sure what impact their own brand loan products are having on the market).

Avantcard now similarly sees itself as a disruptor in the Mortgage market by seeking to launch mortgages - via brokers. This will have limited impact, even if they manage to get to launch the mortgage product in a timely fashion. It’s the same formula that they tried with Chill, except now they are seeking to launch against an even more foreboding economic background.

A major problem they face is that they have no branches and accordingly are entirely reliant on contracted third parties to support and roll out their business proposition for them.

Far from straightforward.

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You need to understand that they are under new ownership since then.

It's now bankinter of Spain.

I doubt if they will market the same products they have in Spain. It will be much like the current banks.

My own guess is that they will come in with 10 & 15 year fixed rates of 2.5% - 3%.

peemac said:

You need to understand that they are under new ownership since then.

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I fully understand the chain of ownership - from Bank of America, to Evo Banco (Apollo), to Bankinter. So what?

It’s still an Irish company operating under Irish CBI rules in the Irish market. Their current owners might be more willing to throw them into the mortgage market, and even throw some capital at them to get them started (considerably moreso than their previous Vulture Fund owners), but that doesn’t guarantee success.

It’s still a remotely located company with no branches operating through third parties seeking to get a slice of the action in a volatile market. They’ll probably do okay, but a disruptor? I think not.

peemac said:

I doubt if they will market the same products they have in Spain. It will be much like the current banks.

My own guess is that they will come in with 10 & 15 year fixed rates of 2.5% - 3%.

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There is talk of sub-2%?

Surely 3-4-5 yr fixed terms are more common here?

So to have any impact they will have to offer 2/3/4/5 yr fixed rates?

Protocol said:

Surely 3-4-5 yr fixed terms are more common here?

So to have any impact they will have to offer 2/3/4/5 yr fixed rates?

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Hi Protocol

That is the argument Irish banks used. "Irish consumers are not interested in long term fixed rates". I always correct them : Irish consumers are not interested in the long-term fixed rates Irish banks charge.

If a lender offered a fixed rate of 2% for 10 years or 20 years , I would say that suddenly you would find Irish consumers love long term fixed rates.

Brendan

Brendan Burgess said:

Hi Protocol

That is the argument Irish banks used. "Irish consumers are not interested in long term fixed rates". I always correct them : Irish consumers are not interested in the long-term fixed rates Irish banks charge.

If a lender offered a fixed rate of 2% for 10 years or 20 years , I would say that suddenly you would find Irish consumers love long term fixed rates.

Brendan

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I have 20 years left on my mortgage and I would take 20 year fixed at 2% all day long. I have a LTV around 35-40%. Hopefully if they do come in they will shake things up.

Protocol said:

There is talk of sub-2%?

Surely 3-4-5 yr fixed terms are more common here?

So to have any impact they will have to offer 2/3/4/5 yr fixed rates?

Click to expand...

I suspect that they will, but that space is crowded and 0.2%/0.3% difference to others is not a game changer

Offering a 15 year or 20 year fixed for under 3% would be a game changer and attract massive headlines

I've zero information, just an opinion.