ICS Mortgages is looking to reopen lending to owner-occupiers and stoke competition in the coming months, after pulling back from the market last year amid soaring borrowing costs.
Dilosk, the parent of ICS, is seeking to raise €540 million in the bonds market. The company this week began marketing bonds backed by a portfolio of existing mortgages, in a process known as residential mortgage-backed securitisation (RMBS), as it looks to recycle capital to help fund fresh business.
This is the first RMBS deal that the lender, led by chief executive Fergal McGrath, has launched since late 2021.
ICS effectively pulled back on offering owner-occupier mortgages last summer as it increased rates and restricted mortgage lending to 2.5 times borrowers’ gross income, compared to the prevailing 3.5 times cap set by the Central Bank for most loans. The regulator has since increased the limit for first-time buyers to four times.
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Last year ICS also tightened its criteria for the level of deposits that buyers need to accumulate to secure a loan.
The lender had started off in the buy-to-let (BTL) market in 2016 before offering owner-occupier loans in late 2019. It remained active in the buy-to-let loans market last year, even as this sector has been shrinking amid a wave of small-time landlords exiting the rental business, according to sources.
Non-bank lenders that entered the Irish mortgage market in the past five years were at the coalface as borrowing rates in financial markets and from wholesale funders jumped in 2022 as central banks started to hike rates aggressively to rein in inflation. By contrast, traditional banks’ loan books are funded mainly by deposits and interest rates there have remained low, particularly in the Republic, even as official rates rose.
ICS, which was acquired by Dilosk in 2014 from Bank of Ireland, unveiled the first set of Irish home loan rate hikes in years in March 2022, hiking rates on its fixed-rate loans. It was quickly followed by nonbank lending rivals Finance Ireland and Avant Money.
Mainstream banks only started raising rates last autumn, led by a move by AIB in October, after the European Central Bank (ECB) started a cycle of rate hikes in July.
Sources previously told The Irish Times that ICS had secured a €900 million loan facility – its largest ever – last year from three international banks to help it continue lending even as the RMBS market remained effectively closed. It is understood that about half of that facility has been used at this stage.
It is expected that the bonds on offer in the current deal will price on Thursday, according to market sources. This is Dilosk’s sixth securitisation transaction.
Most of the loans being refinanced in the RMBS deal were granted in the past two years, according to a report on the matter written by debt ratings agency DBRS Morningstar.
[ Non-banks charging more for variable rate mortgages than traditional lendersOpens in new window ]
Dilosk had about €1.7 billion of mortgage assets under management as of the end of last year, according to DBRS. It had a 5.5 per cent share of new Irish mortgage lending last year, DBRS added, suggesting it wrote about €775 million of business.
The company had a target of €800 million to €850 million of lending for 2022, largely committed in the early part of the year, up from €530 million for 2021.
Dilosk’s founders, Mr McGrath and his brother, Oran, own more than 50 per cent of the company. UK investment firms Attestor Capital and Chenavari hold about 18.8 per cent and 14.4 per cent of the business, respectively. Chenavari had looked last year into exiting its investment, but remains a big shareholder.
