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Interest rate war brews as new bank joins market

A Spanish banking giant is to enter the Irish mortgage market in a move sure to put massive pressure on existing lenders to slash their rates.

The move came as Permanent TSB cut its variable and fixed rates, and performed a U-turn by making the rates available to existing customers, not just new borrowers.

Mortgage rates in this market are among the highest in the eurozone, and are twice the average across the currency bloc. They had started to rise again in May.

But now new entrant Avantcard is to enter the Irish mortgage market in the autumn. Its parent company is Bankinter, the fifth largest bank in Spain, where it has a huge mortgage book. It is expected Avantcard, which will use the brand Avant Money, will offer fixed rates below 2pc. The average rate on a new mortgage across all lenders here is 2.87pc.

No lender currently offers a rate below 2pc in this market, according to mortgage broker Michael Dowling.

But Avantcard, which has operations in Carrick on Shannon and Dublin, says it will use its Iberian experience to bring more choice to the Irish mortgage market. 

The Permanent TSB rate cut was not expected – but it will provide a huge boost for borrowers.

The bank is cutting variable and fixed rates, and making all the new rates available to new and existing customers. Up to now the best rates were only available to new customers.

The bank is reducing its standard variable rate by 0.55pc.

It is also reducing its managed variable rates from between 0.10pc and 0.30pc.

And the bank will reduce fixed rates for all existing customers who are not already locked into a fixed-rate deal – to as low as 2.95pc for a three-year term.

Permanent TSB said more than 70,000 customers would benefit from reductions when the changes would came into effect between August 4 and early September.

New Permanent TSB boss Eamon Crowley said: “This move goes a long way to addressing the discrepancy which traditionally existed between our pricing for new and existing mortgage customers.”

Financial adviser Karl Deeter, of online brokerage Yes.ie, said there now was a mortgage rates war going on in the Irish market.

This was despite the fall-off in home-loan lending due to the pandemic.

“One of the ways you respond to the fact that mortgage lending is down is to have price drops to spur activity,” said Mr Deeter.

Mr Dowling, managing director of Dowling Financial, said the Permanent TSB rate reductions were welcome, but still left Permanent TSB behind the market leaders.

“In my opinion, the real competition is the launch of sub-2pc fixed rates from Avant Card (Avant Money) owned by a Spanish bank, Bankinter.

“Maybe at last we will see Irish mortgage holders get real value like our European neighbours,” he added.

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