Stepstone Mortgages, a joint venture between IIB Bank and Lehman, began trading in the Irish Republic just a year ago. It has now written to brokers informing them that it is “suspending” taking on new business, but will continue to administer the €100m it has already loaned to Irish home owners.
Lehman provided the finance for the venture, with IIB Bank handling the selling and day-to-day management of the business.
But the dramatic increase in the cost of borrowing on wholesale money markets, as a result of the credit crunch, has put margins under pressure, forcing Stepstone to curtail its operations.
Other lenders are also facing difficulty. Start Mortgages, the largest operator in the Irish sub-prime sector, is cutting its workforce by 10%.
Fresh Mortgages, a new niche lender backed by some of the most prominent names in Irish business, including Sean Fitzpatrick, chairman of Anglo Irish Bank, has suspended operations following the withdrawal of its financial partner, Credit Suisse, and its failure to find alternative funding.
Finance Ireland, which specialises in equity release mortgages, has also fallen victim to the crisis. The firm, led by former Irish Permanent chief executive Billy Kane, said it was no longer offering loans to new customers “due to the unavailability of reasonably priced wholesale funding”.
Kane said the company has sufficient funds to operate its current business and “will honour all ex-isting loan offers”. But he added: “At a time when credit markets are all but closed, it does not make financial sense for a niche player like ourselves to continue to fund new lending.
“We believe the best approach is to temporarily withdraw our lifetime mortgage products from the market. We expect to be in a position to reintroduce these products when the wholesale banking market stabilises and normal credit conditions return.”
The highest profile Irish casualty of the credit crunch has been the International Securities Trading Corporation, a specialist lender headed by former Anglo Irish banker Tiarnan O’Mahony, which attracted investment from some of Ireland’s richest people.
It was recently forced into examinership with debts of €655m and has now been acquired by British investment bank Collins Stewart in a €5m rescue deal.