Avant Money launches a new mortgage today from < 2%

[Brendan Burgess]

0.2% difference in what is on the market already

Hi peemac

What is the next cheapest 7 year fixed rate after Avant?

KBC 2.45% for 5 years
KBC 2.85% for 10 years
Ulster Bank 2.99% for 7 years

So 1.95% for 7 years is a big cut.

Even 2.4% for 7 years <80% is probably a good bit cheaper than the rest of the market.

So Avant is game changing
1) For LTVs below 60%
2) For 7 year fixed rate mortgages.

Brendan

 

[peemac]

Hi peemac

What is the next cheapest 7 year fixed rate after Avant?

KBC 2.45% for 5 years
KBC 2.85% for 10 years
Ulster Bank 2.99% for 7 years

So 1.95% for 7 years is a big cut.

Even 2.4% for 7 years <80% is probably a good bit cheaper than the rest of the market.

So Avant is game changing
1) For LTVs below 60%
2) For 7 year fixed rate mortgages.

Brendan

This applies for a very small cohort and I would not see it as a game changer.

But a 90% LTV and 15 year fixed option at about 2.5% would have a game changer especially for younger couples as they could budget their expenditure long term.

 

[shweeney]

no switching incentive is an issue. For me to switch to KBC I get 3K back, say 1.7K after the legal fees; the difference between 2.25% and 1.95% is about €300 per annum for me so I'd need to stay with Avant for 5+ years and assume rates don't fall further to come out ahead of switching to KBC...

AIB have already reacted, KBC may also drop rates...

 

[Protocol]

They are restricting lending to Dublin, Cork and Galway.

I don't see any mention of that on their website?

So just Dublin Cork and Galway cities?

Or counties?

 

[Brendan Burgess]

So Avant is game changing
1) For LTVs below 60%
2) For 7 year fixed rate mortgages.

This applies for a very small cohort and I would not see it as a game changer.

That is not a small cohort at all.

Huge numbers of people have LTVs below 60%.

I think they missed an opportunity to bring 10 year and 15 year fixed rates at 2.5% or lower.

Personally, I would much prefer a 7 year rate of 1.95% to a 10 year rate of 2.5%.

This is a game changer for most people if they can be bothered to switch.

Brendan

 

[shweeney]

I know people like peace of mind but rates are only going one way over the next few years (down) - I'd be reluctant to fix for a long period.

 

[Sarenco]

This applies for a very small cohort and I would not see it as a game changer.

Given the very significant increases in residential property prices since 2012/13, I would imagine that there is actually a fairly large cohort of mortgage borrowers with 40%+ of equity in their PPR.

This move by Avant Money is very definitely a game changer for low-LTV mortgages.

 

[NoRegretsCoyote]

Huge numbers of people have LTVs below 60%.

Indeed, but many of them will have 10 years or less remaining on the term.

People with low LTVs and low payments as a share of income will be better able to ride the waves of interest risk and won't see the benefit of fixing the way someone paying 35% of their income will.

 

[Sarenco]

I know people like peace of mind but rates are only going one way over the next few years (down) - I'd be reluctant to fix for a long period.

Without the benefit of a crystal ball, I don't see how you could possibly make that statement with any confidence.

 

[Blackrock1]

its not a no brainer, if there is no ability to overpay and no switching inducement (so you have legal fees) then you need to make sure the numbers work for you.

 

[shweeney]

Without the benefit of a crystal ball, I don't see how you could possibly make that statement with any confidence.

OK, but I've been hearing for years it's only a matter of time before ECB rates start rising; it hasn't happened and with the pandemic seemingly with us for another year at least it's hard to see them rising anytime soon. Those ultra low rates have been slow to reach the Irish mortgage market but rates have been slowly dropping, they're certainly not going up. That's just my personal opinion, I've always been wary of fixed rates because you're effectively betting against the bank, but with fixed now where the competition is happening I'd be reluctant to fix for more than say 2 years.,

 

[Wiresandmore]

Does Avant not change this given you could get 1.95% fixed for 7? Have to say I find it very hard to see rates dropping much below that.

 

[Sarenco]

its not a no brainer, if there is no ability to overpay and no switching inducement (so you have legal fees) then you need to make sure the numbers work for you

You can always have part of your mortgage at a variable rate of 2.5% that you can pay off as you see fit.

In any event, break fees will always be less than the interest that you would save by paying off early.

The legal fees/costs for switching will fade into insignificance for most borrowers if they result in a 50bps+ cut to their mortgage rate.

 

[Deeks1]

I understand that Avant will be quite selective in their underwriting.

For example, at present, they are considering only customers in Dublin, Cork or Galway.

And as they say in their press release:

• Stable employment with no obvious risk to future employment prospects

Brendan

How can they claim to be not "cherry picking" customers which is a direct quote from the interview this morning and then only consider customers from three cities. Surely thats the very definition of cherry picking??

 

[Brendan Burgess]

Indeed, but many of them will have 10 years or less remaining on the term.

OK, that will narrow it down a bit.
But a lot of people took out 30 year mortgages in 2010 and so have 20 years left.

House prices have increased since then.
They have paid down capital.

So I would still think that it's a big enough cohort.

If you have 100k left with only 7 years to go you will save €3,500 interest if you get a 1% reduction.

But in the first year, you will save €1,000 which will cover the legal costs.

So I think it's still worth doing.

Clearly, if you have €50k left with two years to go, it's not worth switching to another lender.

Brendan

 

[ClubMan]

2) They have invested a lot in this project and so they want to make a big splash - they will not be cherry picking.

They are restricting lending to Dublin, Cork and Galway.

So they ARE cherry picking?!

 

[ClubMan]

any incentives to switch (other than the rate obviously)?

You mean gimmicks?
Hopefully not and hopefully they focus on low rates as other lenders also should.

 

[jim]

I like the gimmicks. Made me some nice switchers fees recently by switching 3 times. Long live the gimmicks

 

[Brendan Burgess]

How can they claim to be not "cherry picking" customers which is a direct quote from the interview this morning

Yes, they are cherry picking and they are dead right to do so.

I remember attending the repossession court in Donegal. A full day long session. Only about half of the cases reached. No orders granted. I am not sure, but I think that outside Dublin and Cork , the person granting the order for possession is also the person who would have to enforce it.

I suggested to a couple of bankers afterwards that they should announce very publicly no further mortgage lending in Donegal or Kerry until it was possible to enforce their security. Kerry apparently was as lawless as Donegal.

So lending to two or three cities and being competitive at less than 60% LTV makes sense.

Brendan

 

[Deeks1]

Yes, they are cherry picking and they are dead right to do so.

I remember attending the repossession court in Donegal. A full day long session. Only about half of the cases reached. No orders granted. I am not sure, but I think that outside Dublin and Cork , the person granting the order for possession is also the person who would have to enforce it.

I suggested to a couple of bankers afterwards that they should announce very publicly no further mortgage lending in Donegal or Kerry until it was possible to enforce their security. Kerry apparently was as lawless as Donegal.

So lending to two or three cities and being competitive at less than 60% LTV makes sense.

Brendan

I get that and can totally see the point. However they specified on the radio this morning that they were categorically not cherry picking which is complete rubbish as it turns out. Doesn't bode too well for the future if their first announcement is a sham.