Finance Ireland suspends long-term fixed mortgages as funding costs rise

Finance Ireland has withdrawn its pioneering long-term fixed mortgages from the market in a sign of growing pressure on non-bank lenders from higher funding costs. The specialist lender, which launched Ireland’s first 20-year fixed product just a year and a half ago, will now stop offering fixes of 10 years or more to new customers. The company said applicants who have already received an offer will be processed as normal but that new applications were no longer being accepted from Wednesday.

“Given current volatility on interest rates internationally, we have decided to suspend our longer-dated fixed rate products for periods of 10 years or more,” said a spokesperson.

“We plan to reopen applications for such products in due course when more normal markets return.”

The move comes a day before the European Central Bank is expected to raise rates another 0.75pc as part of a global trend of rapid monetary policy tightening that has sent bond yields soaring. The yield on Irish 10 year benchmark bonds has risen from 0.27pc at the start of the year to 2.6pc today. Finance Ireland’s bank competitors have been able to absorb rate hikes due to plentiful low-cost deposits, keeping most of their mortgage at or below the risk-free rate on government bonds. Non-banks, however, are more directly exposed to the rapidly rising bond market funding costs, making long-term price promises more risky and less economical.

Finance Ireland shocked customers earlier this month when it announced mortgage rate rises of up to two percentage points with immediate effect. The sudden change in terms threatened to collapse property deals and meant that some people trying to switch to Finance Ireland mortgages had to pull out as the value of such a move evaporated. The lender climbed down after drawing intense criticism, offering a one-month grace period for approved borrowers to draw down loans at lower rates before implementing the increase on new customers.

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