Mortgage holders trapped by excessive rates may breathe a sigh of relief as a option to escape excessive rates charged by vulture funds on home loans has entered the market.
Núa Money, the brokerage start-up backed by the Allen beef barons of Wexford, has launched what it now calls Núa Freedom to allow prisoners of vulture funds, trapped by excessive rates of interest, to move their debt.
Núa’s product allows customers to transition without the criteria that they have to be making full capital and interest payments for two years beforehand which is a requirement as most mainstream lenders require before taking on vulture mortgages.
The brokerage, which received its license from the Irish Central Bank last year, offers terms of up to 40 years on its mortgages with a maximum loan to value ratio of 75pc.
Núa’s entry may offer some respite to regular mortgage holders who once faced some of the highest mortgage costs in the EU.
Núa, which began mortgage lending last year, dropped its main lending rate to 0.75pc.
But while Núa is a non-bank meaning it does not fund itself using customer deposits it should, in theory, offer higher mortgage rates. However, since its entry into the market it has cut rates providing competition in the overall market.
Irish rates are now the fifth highest in the Eurozone averaging at around 3 percentage points, the lowest since April 2023. However, they remain half a point higher than the Eurozone average. With only three main pillar banks – AIB, BOI and PTSB – following the exit of Ulster Bank and KBC, consumer advocates have warned of a narrow mortgage market dominated by a few key players.
However, the entry of more players in the market, including Credit Unions who are expected to triple their current mortgage loan book of more than €2bn off the back of new lending limits, has incentivised other lenders to lower their rates.
The online bank Revolut, which currently has 3 million customers in Ireland, has also said it is hoping to enter the mortgage market this year.
More than 100,000 mortgages are currently managed by credit servicing firms, who act on behalf of vulture funds, accounting for close to a fifth of the overall mortgage market.
A recent paper published by the Oireachtas Library and Research Service showed that 7,000 private home mortgage holders are paying an interest rate of between 8.5pc and 10pc with many serviced by various servicing firms including Mars Capital and Pepper Finance.
Since the onset of the now abated global inflationary spiral sparked by the energy crisis and the halt in supply chains during Covid-19 lockdowns, the European Central Bank (ECB) has raised interest rates 10 times to combat price hikes before recent cuts in borrowing costs. Given the funding model of credit servicers who rely on borrowed money as opposed to customer deposits, these rate hikes were passed immediately onto customers. Currently, vulture funds do not offer fixed rate mortgages.
Head of Communications at bonkers.ie Daragh Cassidy said that Nua’s entry into the market will provide much more relief to mortgage holders whose loans were sold to vulture funds: “It’s great to finally see something being offered to this cohort of mortgage customers.
“I really feel this group has been badly failed by the political system. Their loans were sold on without their approval, they had no access to fixed rates, and many were left paying extortionate variable rates as high as 8 or 9% and were practically trapped with their new lenders. So anything which can help them access more normal financing is to be welcomed.”
Cassidy mentioned that while the lowest rates on offer are still from the main banks more competition from non-banks may provide an impetus on other lenders to innovate technologically: “The Irish banking sector has been bereft of innovation for quite a while. In other markets there are better apps, more online services, better product features and better application processes. But the newer entrants, while not always offering the lowest rates, have begun to shake things up in these areas.
“Nua has heavily invested in the digital side of its business. It could be regarded as offering Ireland’s first truly digital mortgage. Its speed of decision making is really impressive. It also takes a more relaxed approach to things like repayment capacity and a more liberal and favourable approach to what it regards as your income which will appeal to some.”
Chief commercial officer of Núa Fergal O’Leary said that Núa Freedom would offer households an opportunity to reclaim their financial freedom but insisted those in arrears would not be applicable for the scheme:
“Núa Freedom is all about giving people the opportunity to take control of their family home and financial future again.
“Many borrowers have worked hard to meet the terms of their arrangements for years, and we believe they deserve access to fair, sustainable refinancing options, which the market haus been unable to deliver in a meaningful way before Núa Freedom.”