Home loan limbo – the growing number of buyers struggling to get their mortgages
Many housebuyers who’ve been directly or indirectly affected by the Covid crisis are experiencing issues with banks and accessing mortgages.
Those who will struggle to get a home loan now range from people in receipt of the pandemic unemployment payment (PUP) to those who are not affected directly by Covid-19 supports, but who work in a sector seen as vulnerable.
It was supposed to be the dream move for Anne and Barry, but rather quickly it turned into a nightmare.
After nearly a year-and-a-half of living with Anne’s parents back in Cork following the couple’s move from Dublin, both decided in January that it was time to fly the coop once again and move into their own home.
When they first moved to Cork, Anne got a transfer with her job in retail, while Barry managed to gain new employment in the hospitality industry as a chef. After the pre-requisite six months of continuous work in their new positions, they set about looking for a mortgage via the services of a broker.
Things were proceeding well until the pandemic hit Ireland in March. Along came lockdown, and the processing of Anne and Barry’s mortgage came to an abrupt halt.
As the nation emerged from its Covid-enforced hibernation, the whole of Ireland felt optimistic – as did both Anne and Barry. The search for a new home and mortgage restarted, much like the economic activity across swathes of sectors previously shut down.
Come September, Barry’s employer moved from the Temporary Wage Subsidy Scheme (TWSS) to the new Employment Wage Subsidy Scheme (EWSS), which doesn’t show up on an employee’s wage slip. The business also introduced a takeaway service with a lot of success, meaning Barry had a powerful letter of undertaking in his arsenal that said his job was secure.
The couple found the house for them and had their mortgage approved. Things were looking up, until the dark clouds of Covid swirled overhead.
“We contacted the broker on the Wednesday to talk about getting the letter of proof, leading to drawdown,” said Anne. “On the Thursday, all the rumours started breaking about the country going back to Level 3 lockdown. I asked if that was going to affect our drawdown, but the broker said ‘Let’s wait and see’.”
For Anne, the nerves started. The couple they were buying the house from were pushing for a quick sale. Doubts about Anne and Barry’s ability to drawdown the mortgage grew stronger.
The country officially moved to Level 3 lockdown and restaurants were limited to takeaway. Barry’s employer became a cause for concern for lenders due to its use of EWSS.
The bank would not proceed with the drawdown after it discovered Barry’s situation.
Despite the best efforts of the couple’s broker, and the advanced nature of the process, Anne and Barry did not get their mortgage. The lender eventually withdrew the offer when the country went to Level 5. The couple couldn’t proceed.
“I was absolutely devastated,” Anne said. “[I was] very emotional. We had come so far; we had been waiting for this for a very long time.
“We weren’t out of pocket, but we were out of hope,” she added.
This example is not an isolated incident. While the names of the couple have been changed, the details are all too familiar for many across Ireland.
The Sunday Independent has interviewed other would-be home buyers and uncovered additional examples of those who have also experienced problems securing and drawing down their mortgages due to Covid-19.
Some spoke of being asked whether they or their employer receives a Covid-19 payment, as well as having mortgages agreed in principle subject to their employer coming off Covid-19 supports. Others reported that the communication from their banks regarding any change of circumstances to their mortgages had been poor, causing additional stress. Many feel they have been left in limbo.
Last week, the banking sector’s communication of changes to the mortgage application process to consumers prompted the Central Bank of Ireland (CBI) to write an open letter.
Addressed to the CEOs of Ireland’s mortgage providers, the letter states that some mortgage lenders have not sufficiently considered the impact of changes, such as additional credit checks before the drawdown of mortgages, on customers in the mortgage application process. It also said some had not managed communications with these customers in a proactive or consumer-centric way.
The letter outlines that CBI expects mortgage lenders to clearly communicate with customers at all stages of the mortgage application process, including those customers who have already received loan offers.
“Mortgage lenders must make clear to customers that where there has been any material change to the customer’s circumstances prior to the drawdown of funds, the loan offer may subsequently be withdrawn, paused or varied. At a minimum, this communication must be included in the loan offer letter,” wrote Helena Mitchell, head of consumer protection at the CBI, in the letter.
Anne acknowledged the letter from CBI to the banks, but said she was still frustrated.
“We felt very much like the last people to know,” she said. “The banks have let us down. We have already bailed them out once. They made a promise, and they reneged on it.”
While emotions are high regarding mortgages, some believe that the banks are being prudent. Memories of the bailout are still very much raw in the industry – no bank wants to see the same happen again.
Banks and mortgage providers contacted by the Sunday Independent, including Bank of Ireland, AIB (which includes EBS and Haven), Permanent TSB, KBC, Ulster Bank and Dillosk, all said that they need to be responsible lenders – not only during the pandemic but at all times.
Most banks talked about ensuring up-to-date financial information is being shared, confirming that customers would have a continuous stream of income and ensuring they can afford the mortgages sought. Most banks said they were still open to applications from all workers from all sectors and were still facilitating loans.
However, an analyst at Goodbody Stockbroker recently pointed to the potential for diverging trends with mortgage approval rates and drawdown. Examining mortgage figures released by the Banking and Payment Federation of Ireland (BPFI) last month, the analyst said one reason for a future gap could be a reluctance by banks to sanction drawdowns for those whose firms are on Government support in the second lockdown.
The BPFI figures said 4,621 mortgages were approved in September 2020, up 19.3pc on the month and 20.8pc on the year, valued at €1.12bn.
Looking at drawdowns, however, 8,220 new mortgages to the value of €1.95bn were drawn down by borrowers during the third quarter of 2020. These figures represent a fall of 30.3pc in volume and 25.8pc in value on the corresponding third quarter of 2019. It should be noted that drawdowns were up on the previous quarter.
While most banks claimed they continued to process applications and facilitate drawdowns, brokers on the ground have expressed concern.
Michael Dowling, a broker who owns Dowling Financial, estimates that 400,000 to 500,000 people may struggle to get a mortgage due to Covid-19 concerns from banks.
Those who will struggle to get a home loan now range from people in receipt of the pandemic unemployment payment (PUP) to those who are not affected directly by Covid-19 supports, but who work in a sector seen as vulnerable – such as construction, retail, hospitality or aviation.
“There is a lack of clear communication around what the banks are prepared to accept and what they are not prepared to accept,” said Dowling. “And there are inconsistencies then in terms of the way banks apply the criteria.”
He said while he respected that banks had the right to apply their own criteria, he pointed to the joint payment breaks agreed across the industry, which had worked well.
Dowling mentioned AIB, which did a U-turn in the summer after effectively halting applications from those on State supports.
“Some banks said they have no issue with accepting applications [from those on Covid-19 supports] but they weren’t proceeding to loan offer, which is the second part of the process,” he said. “And then all banks have a uniform in relation to drawdowns. There is an insistence that you’re not on a Covid-19 payment, or more importantly, that your employer is not benefiting from a Covid-19 payment.
“Ninety-nine times out of a hundred, they just won’t release the funds if that particular situation arises. In the letter [from the bank] they are asking if you as an employee are benefiting, and is your company benefiting [from Covid support schemes].”
Dowling said in some cases banks are seeking letters from employers at several stages of the process – application, loan approval specific to a property and before drawdown – sometimes all within a matter of weeks.
In companies where a portion of staff are being supported via Covid schemes, other employees may find themselves under greater scrutiny.
Dowling gave an example of a senior employee at a company who is earning a six-figure sum. Although his salary is not affected by any scheme, the majority of workers at the company are.
“Banks are nervous then because they are saying maybe the company is under pressure.
“I can tell you at the moment that anyone employed in what the banks have defined as vulnerable industries – retail, hospitality, airline, construction and leisure – well, the banks are taking a view on that,” he added. “I wouldn’t like to be a pilot now trying to get a mortgage.”
The broker said that the actions of banks could be called a “blacklisting” of particular sectors.
When the first lockdown was lifted, the banks remained cautious about these vulnerable sectors. Dowling believes that even next year, banks will want to see that specific companies can rebound before considering staff for loans.
Industry group Brokers Ireland backed up Dowling’s claims and said that banks are now assessing employers and their risks, rather than the individual applicant.
AIB, Ulster Bank, Dillosk and KBC said they reviewed applications on a case-by-case basis.
Bank of Ireland said it assesses each application carefully, taking individual customer circumstances into consideration. It said it wants to approve mortgages responsibly, and considers criteria such as the type of employment or industry as well as evidence of consistent income.
Permanent TSB said it did not exclude any sector from applying for a loan, and is working with its customers on a case-by-case basis.
As Ireland remains firmly in the grips of Covid- 19, and with fears growing that lockdown isn’t quelling the pandemic’s spread, Anne and many others like her fear the dream of owning their own property is further away than ever before.
Looking ahead, Anne, who is pregnant, said she didn’t think she would be in her own home for the foreseeable future. She doesn’t believe Barry will be off the Covid support any time soon.
“We were hoping to be in the house now,” she said. “Our second baby is due in March. If my partner doesn’t come off the EWSS, then we are not going to be in a position to apply for another mortgage until after I return from maternity leave, in which case it would have to be another six months in employment.
“We are looking to at least two or three years down the line,” she added. “That is too late for us. We have come so close.”
The BPFI response
Both borrowers and mortgage brokers say they are seeing changes to bank lending practices first hand. Those spoken to by the Sunday Independent said banks were not allowing some people who were in receipt of Covid-19 supports to draw down their agreed mortgages, while other said certain sectors were being effectively blacklisted.
In response to questions, Brian Hayes, the chief executive of the Banking and Payments Federation (BPFI), said customers may be asked to confirm their employment and income situation had not materially changed as they move through the mortgage process.
“In cases where changes have occurred, and depending on the circumstances of each individual case, a review with the applicant may be undertaken by the lender to determine whether or not the applicant can still afford to make agreed regular mortgage repayments,” he said.
“This approach is considered to be clearly in the interest of both the customer and the lender to ensure that mortgages are not extended to those who cannot now or in the immediate future afford them. This is also in line with regulatory requirements set out by the Central Bank to ensure that borrowers can afford the loans they take out.”
News by independent.ie, edited by Dowling Financial.
Things worth noting
Is it time for the Central Bank to change its rules so house hunters have a shot?
COULD A CHANGE TO RULES PUSH UP HOUSE PRICES? The Central Bank’s lending rules – which prevent first-time buyers from borrowing more than three-and-a-half times […]
Michael Dowling: Benefits of fixing your mortgage for the very long term
My advice for first-time buyers is to take out long-term fixed rates for 20 years or more. There is something of a revolution going on […]
Mark Keenan: Spare a thought this Father’s Day for the separated dads trapped in a soul-destroying housing limbo
A joke I’ve heard more than once from separated dads goes as follows: If two gay men get divorced in Ireland, who gets the house? […]
Spanish bank to shake up mortgage market here with 30-year fixed-rate loans
Spanish-owned mortgage provider Avant Money has upped the ante on its rivals by offering a range of new long-term fixed rates. The provider is the […]
The real problem is ministers don’t actually believe there is a housing crisis
If the Government can’t come up with a radical housing solution, the Coalition parties will find themselves redundant. It is telling that what lit a […]
Calls for cashback mortgages probe before State uses money to back Ulster Bank loans sale
The Government has placed its State-owned Permanent TSB as well as AIB, which owns the EBS mortgage lender, in the lead positions to buy large […]
Irish banking sinks deeper into crisis as KBC follows Ulster out the door
Commentators sound alarm bells as the ‘two big boys’ look set to control 70% of the Irish mortgage market The shock decision by KBC Bank, […]
Michael Dowling: Banks are misleading customers with costly cashback mortgage incentives
Irish mortgage interest rates have gone back to being the dearest in the eurozone and we need to focus on immediate changes that can be […]
Broker says lenders are using wage subsidy scheme to refuse mortgages
Lenders have been accused of using the State wage subsidy scheme to “blackball” mortgage applicants. It comes after it emerged that lenders are now turning […]
Calls for cashback mortgages probe before State uses money to back Ulster Bank loans sale
The Government will need to launch an investigation into “the exploitation” of first-time homebuyers lured by cashback incentives before it commits taxpayers’ money into State-owned […]
“We nearly lost dream home because bank got jitters over wage subsidy”
A leading bank was set to deny a couple a mortgage to buy their dream home, just as they were about to draw down the […]
Mortgage lenders push back against automatic payment breaks during lockdown
Mortgage lenders have pushed back against a call by a leading broker to re-introduce automatic payment breaks for people who will be unable to work […]
Demand for mortgage exemptions expected to surge this year
APPLICATIONS for mortgage exceptions are expected to surge to record levels in January as lenders respond to pent-up demand from borrowers. Exemptions to the strict […]
Controversial equity release loans for older people are back
An equity release provider is reopening in this market years after the banking crash closed off the availability of these loans. Equity release involves older […]
Experts cautious about 2021 property market
Property prices are predicted to take a minor dip in 2021 before recovering to current levels by the end of next year, according to two […]
Borrowers here paying €2,000 more a year than European counterparts
This was down 14 basis points on the same month last year. But the average across the euro area is less than half of this […]
Ulster Bank ‘self-inflicted review will mean Irish mortgages will remain costliest in Europe’
The uncertainty over the future of Ulster Bank is already helping the big two mortgage lenders, AIB and Bank of Ireland tighten further their grip […]
Average Irish person now ‘worth’ €166k
The impact of Covid-19 has been to make households wealthier while the State sunk €14bn deeper into debt, according to the Central Bank’s Quarterly Financial […]
Lenders told to be upfront with mortgage applicants on impact of wage supports
BANKS and other lenders have been told to be upfront with mortgage applicants whose employers are using the State wage subsidy scheme. It comes after […]
Mortgage holders leaving thousands of euro on the table by failing to switch home loan providers – CBI research
Some mortgages could save more than €1000 in the first year and more than €10,000 over the remaining term of the loan. Mortgage holders are […]
What the loss of Ulster Bank would mean for consumers
When news broke on Friday that NatWest, parent of Ulster Bank was considering the winding down of the Bank, the market was surprised. It had […]
Your money: Seven things you must know on the new mortgage playing field
Cheaper home loans will be up for grabs for house hunters and homeowners in the coming weeks and months following the entry of a new […]
Spanish giant to rattle the cages of big firms who have Irish market cornered
You would be forgiven for thinking that competition in the mortgage market had gone by the wayside, like many things during the pandemic. Banks are […]
Interest rate war brews as new bank joins market
A Spanish banking giant is to enter the Irish mortgage market in a move sure to put massive pressure on existing lenders to slash their […]
Banks block drawdowns until end of pay subsidy
Builders and brokers say hundreds of agreed home sales are being placed in jeopardy because of an unintended consequence of the State’s emergency wage subsidies. […]
Banks have yet to heal the €60bn bailout wounds of a decade ago
A decade after a €60bn taxpayer bailout of the country’s main banks, we still have a problem with trust when it comes to how they […]
Ireland faces second mortgage arrears crisis when payment breaks end this autumn, leading financial advisers warn
A leading debt adviser has warned that 30,000 households — or around half of the 62,480 currently on home loan payment breaks — will fail […]
House prices due to fall sharply in wake of pandemic
House prices are likely to fall sharply over the next year, a leading think tank has predicted. The Economic and Social Research Institute (ESRI) has […]
Central Bank boss defends banks withdrawing mortgage offers
Central Bank Governor Gabriel Makhlouf has defended banks that are withdrawing mortgage offers to people whose incomes are hit by the fall-out from the pandemic. […]
Irish Banks Again Europe’s Worst Performer as Crashes Add Up
Once again, Irish banks are at the sharp edge of a global crisis. In 2008, it was the melting away of liquidity. Just over a […]
Mortgage borrowers hit by Covid-19 jobs slump ‘facing problems securing mortgage breaks’
Mortgage borrowers previously in arrears but who are now up to date with their monthly payments have had difficulties in automatically accessing the three-month mortgage […]
Banks add Covid-19 income conditions to mortgage offers
Raft of assurances are sought over bonuses, overtime and future job security Several Irish banks and lenders are adding new conditions to mortgage loan offers, […]
Self-employed may feel chill from Covid-19 for some time
The self-employed face mortgage struggles. All business owners are weighing up the effect of the Covid-19 closures on their trade at present, with many trying […]
House valuations are being reduced by 10pc during the mortgage process due to Covid 19 according to brokers
Some bank valuations are lower than agreed sale prices due to Covid-19 “The valuations are coming in at less than what the agreed purchase prices […]
Family with €1m house would be ‘better off trading down’ as judge rejects personal insolvency deal
A High Court judge has refused to approve proposed personal insolvency arrangements for a couple aimed at allowing their family to remain in a five-bedroom […]
Home truths: Covid’s duration will determine its impact on values
Speculation about where house prices and the property market will end up in the aftermath of Covid-19 has already started, with the publication during the […]
Doubts raised over Covid-19 wage subsidy scheme after lawyers warn the initiative is unworkable
The crucial wage subsidy scheme aimed at keeping hundreds of thousands of people in jobs has been thrown into doubt after lawyers warned it was […]
Those who test positive likely to struggle to get life and mortgage protection cover
Concerns: Michael Dowling fears some people will be unable to take out life cover People who test positive for Covid-19 may struggle to get life […]
How to navigate the property market during the pandemic
These are testing times. Covid-19 has reached into every sector, including the property market, and everyone is scrambling to adapt to the challenge. For those […]
State may need to ramp up spending to €34bn
Employers’ group Ibec and trade unions have called on the Government to step up payments for workers and companies in response to the economic damage […]
No hit to credit record for those who get mortgage break off bank
A deal is being hammered out between the Central Bank and main lenders so people who avail of a Covid-19 mortgage payment break will not […]
Temporary ban on all evictions is to be introduced for duration of coronavirus crisis
The Government has confirmed that a temporary ban on evictions and rent increases will be introduced for the duration of the Coronavirus crisis. Housing Minister […]
€32m debts written off by court in three days
More than €32m in personal debt has been written off this week under insolvency arrangements approved by the High Court. The huge sum relates to […]
€2m debt write-off for publican approved
The High Court has rejected objections raised by a vulture fund to a personal insolvency arrangement (PIA) writing off €2m in debts owed by a […]
Chasm between values of new and second-hand houses
A growing chasm between the values of new and second hand homes has been highlighted by the banking sector which says loans issued to first-time […]
Dublin’s cool Northside moves ahead of stuffy Southside to hold the housing hotspots
Q Two northsiders are travelling in a car. The music is turned off and the windows are up. Who’s driving? A: The Garda. Q: How […]
AIB drops fee for mortgage customers breaking out of fixed rate
AIB is allowing some customers to break out of fixed mortgages and lock into lower ones at no cost, in a move that is likely […]
Ulster Bank fined €4.6m over data on mortgages
ULSTER Bank has been fined €4.6m by the Central Bank for failings around mortgage data it supplied to the regulator. The fine would have been […]
Pressure now on more banks to cut their rates in mortgage price war
More banks are coming under pressure to reduce their mortgage rates after market leader AIB announced a number of reductions. The focus is now on […]
Mortgage holders here still paying double Euro average
MORTGAGE rates in this country have fallen below 3pc for the first time in years. But there is scope for much deeper cuts, mortgage experts […]
Revolution in fintech keeps the bankers awake at night
Shake-up: Revolut and other fintech firms are forcing banks to increase their tech focus I was more than a little surprised at the response I […]
AIB was always going to lose battle – it’s just a pity it waited so long to concede
AIB was always on to a loser trying to defend its actions in denying 6,000 customers tracker mortgages. The bank tripped itself up and was […]
The changes still needed to tackle the banks’ bad management cultures
Regulation: Unlike the UK authority, the Central Bank of Ireland does not have competitional law enforcement powers, an issue which deserves to be reconsidered Banking […]
Paul Joyce: Mortgage arrears have been ignored but not solved
Housing, homelessness, and healthcare have justifiably dominated the election so far. But one aspect of the housing crisis, however, that has received little attention is […]
Home truths: The story of Eoghan and the home hoovers
The big view on Ireland’s property market Whenever Eoghan Murphy is asked about his unforgettable term as Minister for Housing, one of the first things […]
Typical household wealth has risen to €184,900 – but renters are losing out
The wealth of households has shot up due to rising property values. But renters have very little wealth, according to figures from the Central Statistics […]
Most people unaware about credit card interest rate they are charged
The majority of Irish credit card users are unaware of the interest rate they pay, or how it is applied. And even those who say […]
Fianna Fáil may have just pressed the pause button on the property market
The party’s new SSIA may cause a significant number of housebuyers to put their plans on hold for an unspecified period The man who is […]
Court approves debt for equity swap insolvency arrangement
Decision is first to be approved by High Court involving a debt for equity swap The High Court has approved a personal insolvency arrangement (PIA) for a […]
Record €60m debt write-off for former quarry operator gets High Court approval
A former quarry operator has had a €60m debt write-off approved by the High Court – the largest ever under personal insolvency legislation. Enda Patrick […]
State-backed mortgage scheme hikes interest rates steeply despite bank cuts
The interest rate on the Government’s Rebuilding Ireland Home Loan product has been increased massively. Rates have shot up by up to 0.75pc at a […]
Home truths: Big time housing promises without taxes are hollow
What can you get for €16bn these days? Well €16bn is the total amount estimated that Irish people will spend online this year. The Consumer […]
One in 10 mortgage arrears cases involve separated borrowers – BPFI
Banking lobby group calls for State to introduce measures to help separated borrowers. About one in 10 mortgage arrears cases involve borrowers who are separated, […]
In your pocket: Switching mortgage can bring major savings
Rates are falling and lenders are keen to offer better deals – it’s easier than you think. Up to 160,000 Irish families are out of […]
Mortgage interest rates dip but remain more than double euro-zone average
Central Bank statistics show weighted average interest rates on new mortgages was 2.9% in November. Interest rates on mortgages taken by Irish consumers were lower […]
New buyers pay €2,000 a year more than rest of eurozone
RIP-OFF mortgage rates in this country are costing new home buyers €2,000 a year more than our European neighbours. New figures from the Central Bank […]
Pensions deliver decade-best growth of 20.6% in 2019
Zurich Life tops peers as funds recover from calamitous end to 2018. Irish pension funds delivered bumper returns in 2019, making it the best year for investment returns in […]
Another year of dysfunction ahead for Ireland’s property market
Looming general election and UK-EU trade talks add to uncertainty for developers. With the new year now a week old and a raft of predictions […]
Responsible Homeowners Betrayed
Thousands of responsible homeowners have been betrayed by the sale of their mortgages by PTSB into a bond fund which will be serviced by […]
Revealed: Ireland’s most expensive streets and their €2m plus homes
Daily growth of €15m in value of housing stock fuelled by new supply rather than increasing prices, writes Wayne O’Connor A leafy Dublin street sandwiched […]
Value of residential property in Ireland up by 5.3bn euro in last 12 months
SEVEN HUNDRED AND fifteen properties worth €1 million or more have been sold in Ireland so far this year, according to the latest Wealth Report from […]
Want to start the process?
Let us guide you through the mortgage process