New mortgage provider MoCo launches in Ireland

New mortgage provider MoCo has made what it calls a ‘soft launch’ into the Irish market. 

It comes following a period of turbulence in the mortgage market here following the exits of Ulster Bank and KBC and then a record rise in interest rates.

Prospective homebuyers and switchers will no doubt hope the entry leads to better competition and lower rates. But will it?

Here's everything you need to know about the new lender...

Who is MoCo?

MoCo is owned by Austrian bank Bawag, which is headquartered in Vienna and has operations in Austria, Germany, the Netherlands and the United States.

MoCo was set up in Ireland three years ago to develop a mortgage lending platform and had previously been linked with An Post’s long-promised entry into the Irish mortgage market.

But nothing came of the venture and MoCo was eventually sold by its original investors to Bawag, which had also been looking to enter the Irish mortgage market, for a nominal fee earlier in the year. 

MoCo is what's called a 'non-bank' lender in that it won't provide any other banking services or accept deposits in Ireland like a traditional bank (for now at least). So it's similar to how Finance Ireland, ICS Mortgages and Avant Money operate here.

However MoCo (like Avant Money) does accept deposits and offer banking services in other countries and it'll use some of this money to lend on to Irish mortgage customers. This means it won't be wholly reliant on capital money markets for its funding and so should be able to offer competitive rates.

How will MoCo operate?

MoCo will lend through a select panel of independent brokers and is open to first-time buyers, movers and switchers.

At the moment it’s only working with a very small number of brokers, but this is likely to increase over the coming months.

All applications will be done online and MoCo says it will use the power of Open Banking to view applicants' banking statements quickly and easily online so you won’t have to worry about the hassle of ordering statements.   

What will MoCo offer? 

The entry of MoCo should in theory be good from a competition point of view, especially after the recent exits of KBC and Ulster Bank. And hopefully this will lead to better rates for mortgage customers in the longer-term.   

However MoCo’s current offering is…well average at best.

MoCo is currently only offering the choice of a fixed rate over three or five years. So those hoping to be able to fix for longer might be disappointed. AIB and BOI offer fixed rates of up to 10 years for example and Avant Money even allows you to fix for up to 30 years.

And those who want the flexibility of a variable rate might be disappointed as MoCo doesn’t offer these to new customers at present.

And MoCo’s fixed rates aren’t particularly competitive. 

For example the average first-time buyer with a 10% deposit, who is borrowing €270,00, will get a rate of 5.05% with MoCo. However Avant is offering a rate of 4.10% and Bank of Ireland is offering 4.25%

And if you’re buying a brand new home, you can avail of a much lower ‘green’ rate with some lenders.

MoCo is offering first-time buyers, movers and switchers a €1,500 cash incentive to help towards their legal fees, which is handy. But even this isn’t as competitive as the cashback on offer from Bank of Ireland or PTSB, which also have lower rates.

MoCo says it will offer exemplary service and claims its modern systems will allow it to make fast decisions on mortgage applications. However most lenders now make decisions within a few days anyway, if not quicker, so it remains to be seen if this will be enough to sway prospective homebuyers. And it’s unlikely many people will save money by switching to the new lender for now at least. 

Here’s a look at the best five-year fixed rates as of today.

We are pleased to confirm that MoCo commenced mortgage origination activity in the Irish market with a soft launch on November 16th. The MoCo team will initially work with a small number of independent brokers with a focus on building strong relationships and delivering exemplary service.

A spokesman for Bawag

A conservative launch

MoCo seems to be taking a conservative approach to its launch in Ireland. 

It's still not known how strict its lending rules will be or how easy it'll be to get approved for a mortgage.

While all lenders must abide by the Central Bank's mortgage lending rules, they still have discretion in how they classify certain types of income like bonuses, how easily they'll lend to those who are self-employed or in fixed-contract roles, and the types of property they're willing to lend against for example.

When Avant Money first launched in Ireland it had some of the strictest lending standards and would only give a mortgage on properties in certain cities - but it also had some of the lowest rates. 

MoCo's rates are much higher and at the moment you could get a cheaper rate with almost every other lender. So it'll be interesting to see if it compensates for this with slightly looser lending rules over the coming months.

But don't expect a price war from MoCo anytime soon - indeed Bawag made it clear to its own investors over the summer that MoCo would compete on service and not on price. But it remains to be seen if this will be enough to tempt homebuyers...