Finance Ireland pulls 10-year fixed mortgages as ECB meets
Founder of Finance Ireland Billy Kane.
Finance Ireland has pulled its 10-year fixed mortgage products, delivering a blow to the Irish mortgage market that reflects the pressures building as the European Central Bank prepares to hike rates further.
The long-established lender, which is led by industry veteran Billy Kane, had offered among the most-competitive long-term fixed-term rates in a market dominated by the big banks, which had until recently offered fixed rates of short duration.
Finance Ireland said the withdrawal of its 10-year and longer fixed rates was a "temporary" move caused by global market uncertainty over interest rates.
However, Finance Ireland is a so-called non-bank lender which means it relies more than traditional lenders directly on markets to fund its mortgages to borrowers.
Markets have in recent weeks reflected the uncertainty about how high the European Central Bank will push interest rates next year in its fight to tame inflation.
It comes as market participants are betting the European Central Bank will sanction a rate increase of 75 basis points, or by three quarters of a point, when its governing council meets on Thursday.
Leading mortgage broker Michael Dowling said Finance Ireland had offered among the best ultra-long-term fixed rate loans. The withdrawal of the products showed up the weakness of the non-bank funding model at a time when interest rates were rising rapidly for the first time in over a decade, he said.
Rachel McGovern, director of financial services at business group Brokers Ireland, said the move was “worrying".
“The non-pillar banks do have a different funding model to the pillar banks but there is a strong rationale for long-term fixed interest rates remaining to be a feature of the market,” she said.
Eurozone government bond yields steadied ahead of the European Central Bank meeting. Money markets fully price in a 75 basis-point rate hike, according to Refinitiv data.
Eurozone inflation came in at an annual rate of 9.9% in September, the highest on record and well above the European Central Bank's 2% target rate, data showed earlier this month.
Germany's 10-year government bond yield, the benchmark for the eurozone, drifted down to 2.13%, having dropped earlier this week.
“We suspect the European economy is already in a recession due primarily to the deepening energy shock, as Europe is a large net energy importer, unlike the US, and gas dependency is significant,” Lale Akoner, senior market strategist at BNY Mellon Investment Management, said.
“This puts the ECB in a bind as to the pace of its hiking cycle. We continue to expect a front-loaded tightening by the ECB, with another 75 basis-point rate hike this week, taking their policy rate to 1.5%,” she said.
Meanwhile, consultancy Capital Economics predicts that the US Federal Reserve will hike US rates also by a further 75 basis points when it meets next week.
“But that ultra-aggressive pace of tightening won’t continue indefinitely and, while he will be keen to avoid stoking more excitement in the markets over a potential ‘pivot’, (Fed) chair Jerome Powell might offer a slightly stronger hint that smaller rate hikes lie ahead,” the consultancy said.
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