Finance Ireland moves into mortgage market via purchase of Pepper's loan book

Brendan Burgess

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Statement by Finance Ireland



  • Finance Ireland announces entry into Irish residential mortgage market


  • Announces agreement to acquire Pepper Money’s Residential Mortgage platform in Ireland


  • Plans to launch additional mortgage products in the New Year




Thursday 18th October 2018. Finance Ireland, the country’s largest non-bank lender, has confirmed that it is accelerating its plans to enter the Irish residential mortgage market. The Company has today agreed to acquire the mortgage origination business of Pepper Money in Ireland. The purchase price is not disclosed.


A c€200M Irish residential mortgage loan portfolio, consisting of approximately 900 performing mortgage loans originated by Pepper Money over the past two years will also form part of the transaction. The existing terms and conditions of customers whose loans will transfer to Finance Ireland will be unaffected.


Speaking today, Finance Ireland founder and CEO, Billy Kane, said that the transaction will greatly accelerate the company’s entry into the Irish residential mortgage market. He confirmed that there are further plans to broaden out the mortgage product range in the New Year to compete with the main retail banks in Ireland. The Company will distribute these mortgage products exclusively through regulated mortgage intermediaries.


Finance Ireland, which was established by Billy Kane in 2002, has strong market positions in Auto Finance, SME Finance, Agri Finance and Commercial Real Estate Finance.


Finance Ireland employs c. 115 staff and reported lending of over €430 million for 2017.
 
It would seem that Finance Ireland are not going to undercut existing lenders, yet they intend to target borrowers with a prime credit rating. I am confused as to how prime borrowers can be lured to them if there are cheaper rates elsewhere. Surely a cheaper rate is needed to entice prime borrowers.
 
Not exactly the news we all hope for. What is competition if you dont actually compete. Cartel banking in Ireland will continue.
 
More in the Sunday Times here:
- No cashback.
- No online and phone sales. All broker sales.
- 75%-80% of lending will be prime.
- Will compete on "long term value". Does that mean long-term fixed rates?
 
CiaranT said:
More in the Sunday Times here:
- No cashback.
- 75%-80% of lending will be prime.
- Will compete on "long term value". Does that mean long-term fixed rates?
Click to expand...

It will be very interesting to see whether people will subscribe to the model without cashback, as this will mean an up-front cost to switchers. How quickly a payback would switchers required to justify this. I could move to UB today at 2.3% fixed for 2 years and get 1500 cashback which will pay my solicitor and might get a meal out of it for the hassle ! If I have to pay the 1500 myself, I would need to at least gain that back over the initial two years, otherwise why would I not go with Ulster Bank. So if the mortgage is 400k, the rate from Finance Ireland would need to be 0.2% lower for me to be quids in (say 800 a year). Then you have the cashflow to consider etc.

It will be interesting to see what they position in the longer term, but if they are looking for prime lending, they will need to carefully target it. It can be done, as I said in the other post by being creative in the products offered - but they will need to come up with something novel
 
if they can go sub 2.8% on 10 year rates they may get some traction, otherwise the current offerings (for prime mortgages at least) will be hard to beat.
 
Blackrock1 said:
if they can go sub 2.8% on 10 year rates they may get some traction
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But that would surely be competing on price. I thought they said they were not going to do this ?

Unless they want to work on the basis that your roll-off rate from fixed is not excessive - but hard to define that at this stage, especially if its variable based! Would they be cheeky enough to offer a ECB tracker at say 2.5% above ECB? Would people go for that?
 
Blackrock1 said:
so they want prime ? and wont compete on price, what is the value offering here?
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that is the current mystery until they announce their products in the new year !

I think this poster sums it up perfectly ! Yes they can do it, but in my view need a very creative product if not competing on price !
 
im probably their target market, circa 50% LTV and a reasonable sized mortgage (from their perspective), itll have to be pretty bloody creative.

an Offset mortgage maybe, id move for that.
 
gnf_ireland said:
Would they be cheeky enough to offer a ECB tracker at say 2.5% above ECB?
Click to expand...
If we ever see tracker rates again, they will track EURIBOR rather than ECB.

It's hard to see how Finance Ireland could have the scale to be able to finance at a rate tracking Euribor. Not impossible, but I can't see it happening.

Blackrock1 said:
an Offset mortgage maybe, id move for that.
Click to expand...
We'll never see offset mortgages again. Apart from the fact they're not a full bank, so can't offer them, RWA / liquidity rules make offset mortgages very expensive to offer.
 
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