IL&P's 'near prime' arm stops lending

SPRINGBOARD MORTGAGES, the Irish Life Permanent-owned lender to high-risk customers, has ceased accepting new applications for loans due to the higher cost and scarcity of bank funding.

The firm, which describes itself as a specialist lender in the “near prime” end of the mortgage market, becomes the fifth such lender to stop lending to high-risk borrowers – those who have irregular income or a history of missing loan repayments.

Start Mortgages is the only lender in this segment of the market still accepting applications from new borrowers, according to Shane O’Sullivan, chief executive of Springboard.

Mr O’Sullivan said that the lender was profitable but ILP had decided to concentrate on its own residential mortgage market.

“In a market where funding has become more expensive and more scarce, the group has made the decision to concentrate its mortgage lending activities on its traditional core market,” he said.

The number of borrowers in default in the “near prime” market, regarded generally as Ireland’s version of subprime, is two to three percentage points higher than customers borrowing from prime lenders, Mr O’Sullivan said.

The company will still consider mortgage offers until the end of June on any applications received before close of business yesterday.

Springboard was set up in December 2006 as a joint venture with investment bank Merrill Lynch. ILP became the sole owner in June 2008. The lender has about 4,000 customers and €500 million in loans with an average loan-to-value of 54 per cent.

Mr O’Sullivan said Springboard’s interest rates ranged from 3 per cent to 9 per cent with an average rate of 5.3 per cent, though this will fall when the recent European Central Bank rate cut is passed on next month.

The other subprime lenders no longer selling new loans to customers are GE Money, Stepstone, which is owned by KBC Bank; Nua, which is owned by Investec; and Fresh, which was owned by a group of private investors.

The market is under pressure because of lenders’ funding pressures, said Mr O’Sullivan.