An Post has set a deadline of January 30th for lenders to express an interest in setting up a mortgages joint venture, months after the State-owned postal service operator signalled its intention to enter the market with rates that undercut mainstream banks.
The company has issued a request for information in recent days, saying: “Prospective partners are being offered the opportunity to share information with An Post on their ambition to enter into a partnership arrangement with a view to developing a sustainable An Post mortgage business in the Irish market.”
An Post secured board approval in September for a new financial services strategy. The company, led by chief executive David McRedmond, has signalled it plans to offer mortgage rates priced at a 1 percentage point discount to the market.
The average standard variable mortgage rate for new loans stood at 3.08 per cent in September, compared to 1.76 per cent across the wider euro zone, according to the latest Central Bank data. European Central Bank president Mario Draghi told the Oireachtas finance committee last month that Ireland's high rates reflect a lack of competition in the market and high level of non-performing loans in the system.
Surprised
However, An Post’s price pitch has surprised existing mortgage players, given that the company has not yet lined up a lender to underwrite the loans.
Mark Bourke, the outgoing chief financial officer at AIB, which has the largest mortgage book in the Republic, told analysts on a conference call on October 26th that An Post was "a very long way from being a real and present threat" by openly targeting a 1 percentage point rate difference without having a designated partner in place.
Billy Kane, chief executive of non-bank lender Finance Ireland, which plans to enter the mortgage market next year though the purchase of Pepper Money's €200 million home loans portfolio and lending platform, said in an interview with The Irish Times last month that it will take some time before Irish rates converge with European norms.
Domestic crash
Irish banks face higher funding costs and have to hold more expensive capital than most other European peers as a result of the scale of the domestic crash and fact that it is very difficult for lenders in the market to foreclose on loans in default, he said.
