Avant Money said it plans to launch a mortgage product next month where rates are linked to a key European banking rate, a feature that has echoes of tracker mortgages, which lenders stopped offering in the Irish market in 2008.
The so-called flex mortgage will have a rate that is linked to the 12-month Euribor rate, a key benchmark of the average rate that banks are willing to lend to each other in the euro zone.
The customer’s interest rate is set on the day of drawdown and adjusted annually based on the 12-month Euribor market rates, while also providing certainty over their repayments for the following 12 months, Avant said. As such, it is a variable mortgage.
The product is starting off with a rate of 3.31 per cent, which is lower than the 3.82 per cent average rate of a new mortgage in the market in January, according to the latest figures from the Central Bank.
“The flex mortgage is our latest innovation, designed to give Irish consumers more choice in how they manage their mortgages,” said Brian Lande, head of mortgages for Avant Money. “This type of mortgage is already very popular across Europe, and we are pleased to be the first lender to bring this to Ireland.”
Irish banks stopped offering tracker loans linked to the European Central Bank (ECB) rate in 2008 as their own borrowing costs spiralled during the financial crisis and fell out of kilter with central bank rates. Linking loans to Euribor, a market rate, is aimed at avoiding this risk for the lender.
For borrowers, having loan that’s linked to a market rate removes the risk of a bank arbitrarily changing rates, as can be the case with standard variable mortgages.
“Since 2008, Irish mortgage consumers have had just two options – fixed or variable rates, with variable rates set at the lender’s discretion and often uncompetitive,” said Martina Hennessy, managing director of Irish mortgage brokers Doddl.ie.
“The new Avant Money flex mortgage brings greater transparency to variable rates by setting a clear fixed margin to the published Euribor rates, allowing borrowers to track and monitor their rate with confidence.”
“Avant Money entered the market in 2020 with a market-leading 1.95pc rate, and a mandate bring long-term value to Irish mortgage customers. They have since disrupted the market with innovative offerings, including Ireland’s only whole-of-mortgage fixed rate product.”
The flex mortgage product will allow customers to switch to any other Avant mortgage product at any stage, overpay part of their loan or redeem their loan in full, according to the lender.
