June 14, 2021

What’s this about a cheap new mortgage and can I switch?

Did I hear we have a new neighbour in to the Irish mortgage market?

Well, they are new(ish). As of Monday morning, Avant Money started taking applications from would-be or existing Irish homeowners for mortgages. We say new (ish) because the Leitrim-based company has actually been in Ireland for many years. It started out as a credit card company trading under the name MBNA, and then changed its name in 2012 to Avantcard. It is now called Avant Money.

A credit card company offering mortgages? Are the rates high?

Quite the opposite as it happens. The reason why the Avant Money move is big news today is that the company is offering a fixed-rate mortgage which is the lowest on the market.

And what is the rate?

It has three rates: five- and seven-year fixed rate products with the lowest of those rates pegged at 1.95 per cent. This is the first time since before 2008 that rates below 2 per cent have been available to homeowners in Ireland.

2008? Um, wasn’t that when the crash – caused mainly by access to cheap money – happened?

It was but – we are told – it is different this time because all the banks are a lot more careful to whom they lend money. So the heady days of mortgages of in excess of 100 per cent on high-priced houses being handed out to people with little or no visible means to repay them appear to be gone.

So what do these new low rates mean for me?

Well, let’s say you have a mortgage of €300,000 and have 32 years left on it and are paying a variable rate of 2.95 per cent. If you were to switch to the lowest of the rates offered by Avant Money, then you could potentially save €158 monthly. Spread out over the life of the mortgage, and assuming the rate differential exists for the duration, this would equate to savings of €60,000.

I am a first time buyer. Can I take advantage of the low-interest rate?

Yes and no, but mostly no. Under the Avant Money rules the lower rates are only going to be available to those first time buyers with a deposit of at least 40 per cent. So, if you were in the market for a €300,000 house you would need at least €120,000 saved before they would give you the lowest rate. The best you could hope for is the 2.35 per cent rate, although even at that you would need a 20 per cent deposit.

Are there any catches?

Yes there are. For a start you will need to have a substantial amount of equity in your home. The above figures are based on a loan-to-value of below 60 per cent.

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