Up To 8 Of Every 10 Mortgage Applications Are Refused.
I have decided to post this article on our website because I believe it accurately reflects today's Irish Mortgage market. While we are still successful in obtaining mortgage approval for a significant number of our clients, we believe that the banks have set their credit criteria at prohibitive levels, and in doing so, are stifling demand even further. I believe the situation that pertains in Ireland differs from other markets, for example the UK market, where the government has set lending targets for the main banks as a price for bailout funds. We have not set any such finite targets for our own banks,and therefore they appear to be happy to lend at an extremely low level, which accelerates their own recapitalisation.
The problem with this is that this lack of real lending is accelerating the collapse of property values to a level that could never have been anticipated. This in turn weakens our banking sector further, despite the taxpayer bailout. This lack of credit is an issue for all Irish citizens, as the value of their main asset, the family home, (whether it is in negative equity, positive equity, or mortgage free), is being destroyed.
Frank Lenny
30/09/2011.
Up to eight out of every ten applications for a mortgage are being turned down, a survey seen by the Irish Independent has found. The lack of lending is one of the main reasons the property market continues to crash, economists have said. A survey of mortgage brokers, who are members of the Professional Insurance Brokers Association (PIBA), has found that the situation is worse than it was last year for people seeking home loans.
A majority of brokers reported that between six and eight out of every ten mortgage applications were declined in the second quarter of this year, PIBA's survey has found. The main reason that applications are being refused is because of concerns over job security. Lenders are turning down potential new buyers because the applicant has not been in current employment for sufficient time or their employment is a fixed contract rather than permanent.
Another reason for a refusal is because the applicant either has no savings history, a bad credit history or insufficient bank statements. Brokers reported that another problem is that if borrowers are approved for a loan, they are qualifying for smaller amounts than they require. It is also taking longer for people to secure loan approval for a mortgage, with 65% of brokers reporting that it takes four months or longer. During the boom it was common for approval to take just days.
PIBA's Rachel Doyle said; "Banks are largely unwilling to lend for mortgages to large swathes of people who have the ability to repay. They are putting impediments in the way of applicants. We are still a long way off having a functioning banking system".
A spokesman for the Irish Banking Federation acknowledged that property lending was subdued but claimed this was due to a lack of consumer confidence in house prices. Many commentators feel property prices will continue to fall, he said.
"Yes, lenders are looking at applications more carefully. It is about prudent lending and prudent borrowers" he added. The spokesman insisted banks had capital to lend, but admitted that they were also engaged in shrinking their loan books to satisfy regulatory rules. Meanwhile, a seperate study by estate agent Savills claims there has been a halving in the number of unoccupied housing units in Dublin.
The greater Dublin area has seen a fall from 11,000 empty houses and apartments to 5,400 over the past 18 months, Savills Ireland said. Ronan O' Driscoll of the estate agency said the reduction was due to the fact that developers, banks and receivers have started to rent out the vast majority of the properties they hold, and the rest have been sold. "Rental values in Dublin are now stable and demand for rental stock remains very strong throughout Dublin" he insisted.
This article was written by Charlie Weston, Personal Finance Editor of the Irish Independent, and first appeared in the Irish Independent on Tuesday the 27th Of September 2011.