The bank promises to make the mortgage journey slicker, faster and less onerous. But will its overall proposition be enough to truly shake up the mortgage market?
Revolut has grown from strength to strength since it launched in Ireland around a decade ago.
It now boasts over 2.7 million customers here, behind only AIB in number.
As its user base has grown, so too has the range of products it offers. In 2022 Revolut started offering personal loans, in 2023 it started offering credit cards, and in May 2024 it started offering instant-access savings accounts. And Revolut has just recently announced that it has plans to launch a mortgage product in Ireland next year.
The news that Revolut will enter the mortgage market is a welcome development for prospective homeowners and mortgage switchers. Although the Irish mortgage market isn't perhaps as uncompetitive as we might think (there are now 10 mortgage lenders here if you include the credit unions) around 90% of the market is still in the hands of the three main banks: AIB, Bank of Ireland and PTSB. So even though there’s a fair bit of choice, the market is still very concentrated. And this partly leads to Ireland having above average mortgage rates compared to the rest of the Eurozone.
So any new competition in the mortgage space, especially from a bank as big and popular as Revolut, is likely to be a game changer.
However there are still big questions as to what exactly Revolut will offer and how competitive its rates will be...
What has Revolut said about mortgages?
Revolut has long made known its intention to start selling mortgages given this is where most banks make the lion’s share of their profits. And in recent months it has been publicly recruiting for numerous mortgage-related roles.
And after the online-only bank published its annual results for 2023, Joe Heneghan, the chief executive of Revolut Europe, told journalists: “We’re very keen to get mortgages launched next year in Ireland. Our team is working very hard on it. I would probably say the first half of next year is realistic. The market is attractive.”
The market here is certainly attractive for Revolut. Mortgages rates in Ireland are still relatively high compared to the rest of the Eurozone and the population, and therefore the demand for homes and mortgages, is growing strongly.
Ireland is also Revolut’s biggest market on a per capita basis. Almost every adult in Ireland now has a Revolut account and the company will be hoping that it can repeat this success in the mortgage space.
But while Revolut will no doubt make the mortgage application process very easy, slick and seamless, there are still many questions as to what its overall mortgage offering will look like...
The unknowns about Revolut's mortgage offering
Revolut now offers personal loans and credit cards. But it’s by no means the cheapest lender for these products. So a key question is how competitive its mortgage rates will be.
When MoCo entered the Irish market at the end of last year it decided not to compete on price. But on speed of application and service instead. Revolut might do the same, which might be a disappointment to those who are looking for cheaper rates.
We also don’t know what Revolut’s lending standards will be like, which could be quite strict. At least initially. When Avant Money started selling mortgages here in 2020 it had quite strict standards in the beginning and even refused to offer people mortgages for properties outside the main towns and cities for the first year. And if Revolut relies largely on automation and AI to make lending decisions, as opposed to human input, it could see many people get rejected for a loan.
In general if someone has a somewhat tricky mortgage application - as many are - it may only get approved after being reviewed and assessed by a qualified mortgage advisor and perhaps even senior management and it may require several follow-up calls with the applicant to discuss matters and get verification on certain details. Revolut may simply refuse all these applications outright and only accept the ‘perfect’ ones as it may not want to deal with people by phone.
Strict lending standards may also mean Revolut may not offer many mortgage exemptions, whereby lenders can loan over four times a first-time buyer's income. It may also not accept many applications from the self-employed or those on contracts, which tend to be scrutinised by lenders more heavily for obvious reasons.
Some recent entrants to the Irish mortgage market have also only offered fixed rates, which may not appeal to those who want the flexibility of a variable rate. And Revolut may do likewise. What’s more, around 50% of mortgage lending in Ireland now goes through mortgage brokers like bonkers.ie. They’re a very important part of the Irish mortgage market and a broker can assist you with your mortgage application and help you get the best rate and loan offer for your particular circumstances. But we don’t know whether Revolut will use this channel or simply force everyone to apply through its app by themselves.
There’s also still a safety issue for some around using Revolut. Even though almost everyone now has a Revolut account, many people are still wary of using it as their main day-to-day current account or for their savings. Admittedly this is less of an issue when it’s Revolut lending you the money - the risk is really all on them. But a lot of Irish people still value the personal touch and being able to chat to someone. This is why everyone loves the credit unions. So it may take a while for people to embrace the Revolut mortgage model.
And then there's the final complex point around arrears and repossessions.
Irish banks take a somewhat lenient approach to people who fall behind on their mortgage repayments. It’s not unheard of for someone to end up two or more years in heavy arrears and still be in their home. Whether this is the right approach is debatable. And it’s all about balance. But in many other countries, even traditionally socialist countries like Denmark and the Netherlands, a stricter approach is taken. So it will be interesting to see what stance Revolut, a UK-based bank with a Lithuanian banking licence, will take on repossessions and its attitude to those in long-term arrears.
Exciting times ahead
Despite all the above reservations, Revolut will no doubt bring a new dimension to mortgage lending and a competitive boost to the Irish mortgage market. And the main Irish banks will surely be looking on with some trepidation as to what exactly Revolut will offer. And rightly so.
There are definitely some exciting times ahead – if you could use that word when talking about mortgages!
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