Families to save as mortgage market shake-up challenges existing lenders
The mortgage market is in line for a shake-up as Finance Ireland signalled its intention to become a key player with the purchase of the home-loans business of Pepper Money.
It plans to grow the Pepper mortgage book and is aiming to launch additional home-loan products in the new year.
The move is set to be a challenge to the existing lenders in the market and comes as An Post plans to enter the mortgage market next year, with credit unions ramping up their mortgage offering.
Headed up by former Permanent TSB executive Billy Kane, Finance Ireland will offer the loans to first-time buyers, movers and switchers. However, it is not expected to undercut the existing banks, but will offer interest rates that are at the mid-point between the highest and lowest on offer.
The lender is a big player in the car finance market and has funding from the State's Strategic Investment Fund.
It has acquired a €200m residential loan portfolio from Pepper Money, the Australian-owned lender that has a base in Shannon.
The loan book comprises of around 900 performing mortgages originated by Pepper in the last two years. The purchase price was not disclosed.
Finance Ireland has also acquired the IT platform and the underwriting expertise of Pepper, allowing it to scale up in the mortgage market quickly.
Pepper had mainly been targeting those who were refused loans from the mainstream banks because of a poor credit history or because they work for themselves. Its rates have been higher than the main banks.
After acquiring the mortgage book, Mr Kane wants Finance Ireland to broaden the offering to compete with the main banks. AIB and Bank of Ireland control around 60pc of the market between them.
Mr Kane said his company will use brokers to sell mortgages. Pepper said it will continue to service the loans that it is selling.
The agreement does not include the Pepper Money Commercial lending business, which Pepper intends to continue expanding and will incorporate into its growing servicing business.
Pepper, which also services around 60,000 mortgages sold by the likes of Danske Bank and Bank of Scotland, is a regulated credit service firm. It will continue to operate as a mortgage services firm.
It said the sale of its own loan book will have no impact on current Pepper Money customers, whose terms, conditions and contact points will remain the same.
Under the agreement, Pepper will continue to service the existing loans on behalf of Finance Ireland, as well as loans originated in the future.
Customers with pending applications with Pepper Money Residential will be contacted directly by Pepper with further information on their applications.
The acquisition by Finance Ireland of the Pepper mortgage book, with its intention to offer more mainstream home loans through brokers, comes days after Bank of Ireland announced tentative moves to re-enter the broker market.