Saturday , October 23 2021

Buyers for the first time lose because banks do not use all mortgage exemptions


Central bank data show that last year's lenders only issued 17% of their exempt mortgages. Photo: Gerry Mooney
Central bank data show that last year's lenders only issued 17% of their exempt mortgages. Photo: Gerry Mooney

Charlie Weston

Desperate first-time buyers who qualify for exemptions from rigid Central Bank mortgage rules are being rejected even though banks are not using their full quotas for off-limits lending, according to the Irish Independent.

Thousands of aspiring real estate buyers are being left "angry and frustrated" after going through all the hurdles to qualify for the exemptions – allowing a minority of homebuyers to borrow more than is strictly allowed .

Analysts blame the complexity of the rules, making it difficult for banks to know how many exemptions will be used.

They estimate that banks may have issued only income exemptions to 11pc from first-time buyers in the second half of last year, half of what they could have issued. This means that thousands of potential new buyers may be losing a mortgage.

According to the rules, first time buyers can not borrow more than three and a half times their income and must have a deposit of at least 10%. The rise in house prices over the last five years is leaving many unable to borrow enough under the rules to meet rising prices.

Major mortgage broker Michael Dowling said that this was making buyers "very disappointed".

Michael Dowling. Photo: Mark Condren

Michael Dowling. Photo: Mark Condren

He said people were seeking exemptions for the loan rules, but despite qualifying, they were being told by banks that they were barred from getting one.

After home shortages, mortgage lending limits are a major hurdle for potential buyers because they limit the amount they can borrow even when ordinary buyers are forced to bid against cash buyers and so-called cuckoo funds .

Central bank data show that last year's lenders only issued 17% of their exempt mortgages. However, lenders are entitled to issue exemptions of 20% of the value of the loans they issue to first time buyers.

Dowling said, "Every day of the week I'm asked why they can not get an exemption." People get very angry and frustrated when they say they qualify for an exemption, but they do not get one. exemptions.

"Exemptions are necessary, but when people are qualifying for them and not getting them, it means there is plenty of room for banks to borrow more."

People qualify for an income limit exemption if, as a couple, they earn more than € 80,000 combined and have higher disposable income than other applicants.

Dowling said brokers were flooded with people looking for exemptions. Banks also exceeded the limits of exemption for second-hand buyers. Only 7% of second-hand buyers obtained exemptions last year, but 10% of loans granted to movers are allowed.

The rules left banks struggling to keep loans at a steady pace, adding to the difficulties for home buyers. Goodbody Stockbrokers banking analyst Eamonn Hughes said that exemption levels may have dropped to 11pc in the second half of last year for beginning buyers.

"In our opinion, this would somehow explain the sharp slowdown in mortgage lending in the second half of last year from the first half – a factor driven, we believe, by the change in the exemption that limits the beginning of November," he said. said.

Lenders said part of the problem was that some buyers were getting exempt mortgage approvals from more than one bank. Banks do not know whether to include these exemptions in their calculations until the loans are reduced.

A spokesman for the Federation of Banks and Payments of Ireland said that banks have to administer the exemptions very forcefully, as they do not want to break the limits, as this would not be tolerated by the Central Bank.

"The challenge they face is to manage the pipeline between approvals and downslops, since they have no way of knowing whether approval will actually be lowered or whether the deadline for reduction will occur."

Independent Irish

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