ICS Mortgage’s parent bond deal lifts competition hopes

It’s an unsettling time for homeowners, with mortgage rates on the rise across the board and various reports showing recently that property prices are declining – even if economists tell us that the slowdown will be modest, as demand continues to outstrip supply.

Still, news that the parent of ICS Mortgages, Dilosk, which was the first new lender to enter the Irish mortgage market after a slew of exits in the wake of the property crash, is lining up its ducks to reboot owner-occupier lending, after effectively pulling back from this segment of the market last summer, is most welcome.

Nonbank lenders were supposed to fill much of the mortgage-market void when Ulster Bank and KBC Bank Ireland decided two years ago to quit the Republic. However, because they source their funding on the bond and wholesale funding markets, they found themselves in the firing line early last year as market rates started to surge in anticipation of European Central Bank (ECB) rate hikes.

In March last year, ICS became the first Irish lender in years to start hiking rates.

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Shortly after the ECB began to raise official interest rates last July, ICS Mortgages tightened its lending criteria dramatically for owner-occupiers, effectively keeping them off the list of most brokers though it remained active in the buy-to-let market.

While sources said at the time that ICS had financial capacity to continue to lend – having secured a €900 million debt facility from three big international banks – the company remained cautious as the international bond markets, where it ultimately refinances its mortgages, weren’t exactly inviting to new issuers.

However, Dilosk has this week launched a bond sale backed by €540 million of mortgages, in a deal that should recycle capital that had been tied up in loans handed out in recent years. If the so-called residential mortgage-backed securitisation (RMBS) transaction closes on Thursday, the hope is that it will pave the way for ICS to return to providing much needed competition in the owner-occupier market in the coming months.

A successful deal would also be an encouraging sign for some other nonbank lenders, including New Money and MoCo, that have also been looking for some time at entering the market.