New lender set to enter mortgage market in coming months

MoCo, which is owned by Austrian bank Bawag, is expected to add some much-needed competition in the Irish home-loans market.

However, indications from brokers are that it is unlikely to undercut the existing players in terms of mortgage rates, for now.

Vienna-based Bawag bought start-up MoCo for a nominal sum in March of this year and plans to use its banking licence to allow MoCo to offer mortgages in this State.

“We are in the finalisation phase of our set-up and plan a soft launch in the coming months,” a spokesperson for Bawag said.

“The Irish market continues to be attractive with positive long-term macro fundamentals and we are looking forward to this milestone.”

MoCo is understood to be trialling its systems with a small number of brokers before a wider roll-out of its offering early next year.

One broker, who has been briefed on its plans but did not wanted to be named, said: “It is another lender in the market, which is welcome. But it is not going to be cheaper than Avant Money, so it is not clear what its USP (unique selling point) is at the moment.”

MoCo chief executive Aidan Sherry, a former AIB executive, did not respond to calls.

Another broker said MoCo may have a slightly different emphasis when assessing mortgage applications, with more stress on the income of applicants rather than repayment capacity.

However, the broker said there was limited room for manoeuvre on this as the lending criteria rules are set by the Central Bank and are the same for all lenders.

MoCo is expected to stress that its modern systems will enable it to make fast decisions on mortgage applications.

It is understood that the MoCo business model relies on European Central Bank mortgage interest rates falling. Lower rates would allow it to offer competitive mortgage rates and generate a profit.

As it is backed by a bank, MoCo is unlikely to have some of the difficulties of non-bank lenders Finance Ireland and Dilosk/ICS in this market.

They depend on wholesale markets, a situation which has forced Finance Ireland to raise its variable rates as high as 7pc.

Loan books of traditional banks here are funded mainly by cheap deposits. This has enabled them to avoid passing on most of the European Central Bank’s (ECB) rate increases since last summer.

The ECB has raised its main lending rate 10 times since July last year.

Bawag bought out MoCo in a deal that wiped out its founding investors. MoCo was set up three years ago but had yet to receive Central Bank of Ireland authorisation. Now that it is owned by Bawag it will be able to operate in this market.

At one stage MoCo was known to have been in talks to enter into a mortgage joint venture with An Post.

The state-owned postal service has been looking for a partner to enter the mortgage market for the past five years.

The entry of MoCo to the mortgage market comes as credit unions have been encouraged by the Governor of the Central Bank to lend more for mortgages.

Credit unions have some of the lowest mortgage rates in the market.

And start-up Nua Money has been planning to enter the mortgage market here for a while. It is seeking approval from the Central Bank to become a so-called retail credit firm, or non-bank lender. It will then need to up wholesale funding to enter the home-loans market.