Lender Finance Ireland is shedding jobs in its home mortgage division as it and other so-called ‘non-banks’ come under pressure from the rising cost of borrowing funds in the financial markets to lend to consumers.
he finance house, led by former Permanent TSB CEO Billy Kane, is the country’s largest non-bank lender, including auto finance and loans to the commercial real estate, agriculture and small business sectors.
The company entered the mortgage market in 2019 and has built a respectable loan book with €552 million in new loans in 2021, double the previous year. The company employs a total of 170 people, with a minority working in the mortgage business.
A spokesman said Finance Ireland would continue its residential mortgage lending but confirmed job losses.
“Finance Ireland is working with colleagues on a limited voluntary redundancy program as part of properly sizing our resources within our residential mortgage team. This VR program is not open to employees in other parts of Finance Ireland.”
It comes after the company announced last month that it would raise mortgage rates by up to two percentage points and suspended its groundbreaking 20-year fixed-rate mortgages altogether, just a year and a half after that product’s launch.
The company says it intends to reintroduce a long-term fixed rate once interest rates calm down, but the product changes and job cuts underscore the pace of change in the industry.
Another non-bank lender, ICS, has also announced several rate hikes and severely curtailed its new lending.
Banks, which have been under competitive pressure from non-banks in recent years, have been able to cope better with interest rate hikes since the European Central Bank began raising interest rates in July thanks to their ample and cheap customer deposits and have announced significantly lower interest rate hikes. Banks have increased borrowing costs, but less so than non-banks.
On Friday, Permanent TSB increased interest rates on its fixed rate mortgages by an average of 0.45 percent.
The Bank of Ireland has increased interest rates on its fixed-rate mortgages for new customers by 0.25 percentage points. And AIB recently raised its fixed rates by 0.5 percentage points.
However, non-banks are more directly exposed to the rapidly rising cost of funding in the bond market, making long-term price promises riskier and less economical, and undermining a competitive advantage.
That leaves them in an uphill battle to capture the huge share of new and switching business thrown off by the planned exit of Ulster Bank and KBC Bank Ireland from the domestic market.
The withdrawal of the two banks means up to 25 percent of the mortgage market is up for grabs, a golden opportunity to gain market share that the remaining banks appear increasingly well-positioned to take advantage of.
https://www.independent.ie/business/personal-finance/property-mortgages/finance-ireland-to-cut-jobs-in-right-sizing-of-its-mortgage-team-42156176.html Finance Ireland is set to cut jobs at the ‘right size’ of its mortgage team