ICS Mortgages is planning to reboot its owner-occupier mortgage offering, after the company secured “very strong demand” for €400 million of bonds sold in the market on Thursday, according to the chief executive of the lender’s parent.
ICS pulled back on offering owner-occupier mortgages in the summer of 2022 as it increased rates and restricted mortgage lending to 2.5 times borrowers’ gross income, compared with the prevailing 3.5 times cap set by the Central Bank for most loans. The Central Bank has since increased the cap to four times.
“We will be announcing over the coming weeks several exciting enhancements to our owner-occupier product range as we look to grow our mortgage business into 2024 and beyond,” said Fergal McGrath, chief executive of Dilosk, owner of ICS.
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Mortgage industry sources expect that ICS will lift its current loan-to-income restriction to the regulatory limit as part of the new offering. Mr McGrath declined to comment on this or potential rate moves, citing competition rules.
The lender’s best current owner-occupier rate, at 5.5 per cent, is much higher than headline rates of about 4 per cent on offer in the market.
The €400 million bond deal which was priced on Thursday evening marked the eighth time that Dilosk had refinanced pools of mortgages through a process called securitisation since the company acquired the ICS brand from Bank of Ireland a decade ago. All told, Dilosk has now raised about €2.4 billion through eight transactions in the international capital markets over this period.
While Dilosk had also carried out residential mortgage-backed securitisation deals in April and July last year, Mr McGrath said investor demand for bonds backed by home loans has picked up significantly recently. This comes as bond investors expect the European Central Bank (ECB) to start cutting rates at pace this year, having hiked its main lending rate from zero to 4.5 per cent in the 15 months to last September.
As non-bank lenders source their funding in the wholesale and bond markets, they were particularly affected as market rates spiralled in recent years. Banks, meanwhile, have been able to fund their loans from cheap deposits, which allowed them to avoid passing on the full effect of ECB rate hikes to mortgage borrowers.
While ICS did not fully withdraw from owner-occupier mortgage lending as official rates grew, its above-market rates and loan-to-income restrictions served to curtail the flow of business. The company remained active in the niche buy-to-let market, even as this sector has been shrinking in recent years amid a wave of small-time landlords exiting the rental business.
Fellow non-bank lender Finance Ireland claimed late last year, as its mortgage business also waned, that mainstream banks were engaging in “predatory pricing” by using cheap deposits to keep down their home loan rates and squeeze alternative lenders in the market.
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