ICS Mortgages to cut rates and lend up to age 80 in bid to rebuild market share

ICS Mortgages has moved to cut owner-occupier rates and extend repayment periods for borrowers until the age of 80, as it seeks to rebuild market share after a period when it wrote very little such business amid soaring ECB interest rates.

The nonbank lender, owned by Dilosk, will cut its three- and five-year fixed rates by half a percentage point from the start of June. That will bring its three-year rate for a loan of up to 80 per cent of the value of a property to 5.2 per cent and its five-year rate to 5 per cent, according to the group’s chief executive Fergal McGrath.

The new rates will not leave ICS with a market-leading price on either type of product, but they will bring it closer to the better rates on offer in the Republic. Avant Money, owned by Spanish bank Bankinter, is currently offering a five-year fixed rate of 3.8 per cent, while AIB has a 4.7 per cent rate on a similar product.

Although Mr McGrath declined to comment on future rate decisions, he said the company has a goal to “pass on” any reductions in its own funding costs to customers.

ICS, which accounted for about 5 per cent of new Irish owner-occupier loans in 2021, pulled back from the market in the summer of 2022 as its parent, Dilosk, saw its funding costs spiral on the wholesale and capital markets.

Banks have had an advantage over nonbank lenders since the European Central Bank (ECB) hiked rates in recent years, as they can use cheap deposits to fund much of the loan books. AIB and Bank of Ireland have about €60 billion of surplus deposits combined parked with the Central Bank currently earning 4 per cent.

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However, Dilosk’s funding costs have fallen this year as it carried out two deals to refinance bundles of mortgages in the residential mortgage-backed securities (RMBS) market. It raised €200 million in such an RMBS bond transaction deal last week.

ICS has also now moved to increase the repayment age on home loans from 70, which has been the limit among lenders in the Irish market until recently, to 80. However, borrowers will have to demonstrate capacity to continue to make payments up to this age, including rental and pension income.

“This feature may help and encourage people to move house as they grow older,” he said.

It follows on from MoCo, a new mortgage lender in the market, owned by Austrian bank Bawag, unveiling a product earlier this year that allows repayments up to 80.

ICS has improved its offering to public sector employees this year, allowing for basic salary to be calculated as three levels up the salary scale. It previously allowed two levels.

ICS had remained activity in the shrinking buy-to-let market in recent years, even as it was largely out of the owner-occupier space.