Avant Money launches new "tracker like" mortgage product

Avant Money has shaken up the mortgage market by launching a new variable rate that tracks a key eurozone lending rate, giving it the hallmark of a tracker mortgage.

Trackers were once hugely popular in Ireland, and are available in many other mortgage markets, but stopped being sold in Ireland over 15 years ago.  

Avant is calling its new variable-rate mortgage product the Flex Mortgage.

Until now Avant only offered fixed rates to new customers, so the launch of a variable rate is noteworthy in and of itself. But perhaps the biggest news is how the variable rate works.  

Here's everything you need to know...

How does Avant Money's new mortgage product work?

Avant Money’s Flex Mortgage is a variable rate that is benchmarked against the 12-month Euro Interbank Offered Rate (Euribor).

Euribor represents the average interest rate at which European banks lend money to one another and serves as a benchmark for various financial products such as mortgages and savings accounts. 

Avant then adds a set margin to this rate, which will depend on your loan-to-value (LTV) ratio.

For those with a 10% deposit or an LTV greater than 80%, a 1.10 percentage point margin is added.

For those with a 20% deposit or an LTV under 80%, a 0.90 percentage point margin is added. 

At the moment the 12-month Euribor rate is 2.41%, though it changes on a daily basis, which means Avant’s variable rate would range between 3.31% and 3.51% at present.

However, your exact interest rate will be set on the day you draw down your mortgage and is then adjusted each year based on the 12-month Euribor market rate. So this provides certainty over your repayments for the following 12 months.

The Flex Mortgage is just the latest step in our continued commitment to deliver better, more flexible mortgage solutions that meet the evolving needs of our brokers and mortgage customers. This type of mortgage is already very popular across Europe, and we are pleased to be the first lender to bring this to Ireland.

Avant Money spokesperson  

How is this different to a tracker mortgage? 

Depending on your perspective, trackers were either the best or the worst thing to happen to the Irish mortgage market.

They ended up causing a huge headache for the main Irish banks but they also offered incredible value for a long period of time. 

So Avant has been somewhat hesitant to use the term.   

Tracker mortgages follow the European Central Bank’s (ECB) “main refinancing operations rate”. This rate is currently 2.65% and used to be the ECB’s “official” rate that it used for influencing interest rates in the wider eurozone economy. However, its main rate is now the slightly lower deposit rate.

As discussed, Avant’s product is benchmarked against the Euribor rate. So in this instance there isn't a huge difference between Avant’s Flex Mortgage and a traditional tracker. It just tracks a slightly different rate. 

However, while a tracker rate will usually go up or down within 30 days of a rate change by the ECB, Avant’s "tracker" will only go up or down once a year. So it feels somewhat like a short-term fixed rate too.   

Who is it available to?

Avant says its Flex Mortgage will be available to both new and existing customers from April through Avant and select mortgage brokers including bonkers.ie. 

Are the rates competitive?

Yes. For a standard first-time buyer with a 10% deposit, variable rates range from 4.15% to 5.90% right now.  

And for someone looking to switch lenders and who has around 20% to 40% equity in their home, variable rates start from 3.95%. 

So these rates are much lower. 

And because it’s a variable rate, you can overpay on your mortgage without penalty. And you can also pay off your mortgage early at any time without any fees or charges. So you have lots of flexibility. 

*based on someone borrowing €270,000 over 30 years with a 10% deposit 

Is it right for me?

If you’re on a standard variable rate, it’s at the discretion of the bank as to whether they pass on any rate cuts by the ECB.

But by linking Avant’s variable rate to a benchmark rate, mortgage holders have more certainty and transparency over their repayments.

But you’ll still need to weigh up whether this is the right product for you. 

Fixed rates as low as 3% are now on offer from AIB and PTSB. So you may get better value with one of those. However if rates continue to fall, you may not want to be locked into a long-term fixed rate either. So you should get good advice on all your options. And that's where we can help! 

Get your mortgage with bonkers.ie

If you’re hoping to get your foot on the property ladder over the coming year, or are looking to save money by switching to a different lender, remember that bonkers.ie is here to help. We're more than just a comparison service!  

With our mortgage broker service our team of experienced financial advisors here in Dublin can help you with your entire mortgage journey from application to drawdown.

We work with the country's top lenders so can find you the best mortgage rate for your particular circumstances. We can also apply to multiple lenders at the same time on your behalf, increasing your chances of getting approved for a mortgage, and saving you the time and hassle of having to apply to numerous lenders by yourself. We can also help you with getting mortgage protection and home insurance too.

And the best news is that our service is entirely free and fully digital from start to finish, meaning everything can be done online from the comfort of your home! But don't worry, our team is only ever a phone call away if you need help or clarification on anything.