Blow for first-time buyers as two major banks cut off mortgage exemptions

Blow for first-time buyers as two major banks cut off mortgage exemptions

Posted on 26May

Two major mortgage lenders have already reached the limit of how many exemptions to the Central Bank’s mortgage rules they are allowed to offer in a year.

Lenders are allowed to offer more than the strict rules of 3.5 times income and allow less than 20% in a proportion of their loans over a year. It means PTSB and KBC can no longer offer borrowers the mortgage exemptions that allow for loans over the threshold.  

Banks and other lenders have the freedom to lend a certain amount above these limits. In any one calendar year they can give an allowance of up to 5% of the value of mortgages to first-time buyers and up to 20% of the value of mortgages to second and subsequent buyers, and up to 10% of the value of mortgages to buy-to-let buyers.

Both lenders Permanent TSB and KBC, which recently announced it was leaving the Irish market, have used up the exemptions from the rule limiting the amount they can borrow relative to their incomes.

Many first-time buyers need an exemption to the loan-to-income rule, especially in cities where property prices are higher.

PTSB and KBC’s ending of exemptions comes as the Central Bank said it was holding ‘listening and engagement events’ next month as part of a review of the lending limits. The review will look at the effectiveness of rules and whether they have achieved their aims.

Association of Irish Mortgage Advisors chairman Trevor Grant said yesterday: ‘While this might seem like a blow to first-time buyers, we are advising people not to be disheartened; there are still a number of lenders offering exemptions, and this cycle will correct itself later in the year.

‘It does, however, highlight the importance of the mortgage application process itself and of ensuring that all the boxes are ticked when it comes to approaching a lender for approval.

‘When trying to secure a mortgage, it is imperative that applicants know exactly what lenders are looking for and how to present their particular case to them.’

Mortgage brokers have been flooded with calls from worried first-time mortgage applicants hoping to secure a home-loan.

Joey Sheahan, of MyMortgages.ie, said: ‘Our advice to all has been not to panic.

‘There are still four banks open to exemptions for first-time buyers – Haven, ICS, Finance Ireland, Ulster Bank – while PTSB has not closed off the option for second-plus-time-buyers. We are however, suggesting to those who are mortgage ready, not to delay.

The mortgage market is in a state of flux, as we have seen over the last few months with news of lenders leaving.

‘There has been good news too – most recently from Finance Ireland in relation to its longterm fixed rates.

‘All in all, there are still several banks very much open to new business, so those looking for a mortgage should continue as planned – a very many will be successful.

Source: evoke.ie/2021/05/26/evoke/blow-for-first-time-buyers-as-two-major-banks-cut-off-mortgage-exemptions


Making Cents: 20-year fixed rate ‘a big day for Irish mortgage market’

Posted on 18May

The maximum term of 20 years is twice as long as currently available to Irish mortgage customers.

While home-buying has been making headlines for all the wrong reasons of late, there has been some positive news for potential borrowers, with a number of new rates and long-term fixed rate options announced last week.

Finance Ireland – company which first entered the residential mortgage market in 2018 – launched a range of long dated fixed rate mortgages for owner occupiers.

The maximum term of 20 years is twice as long as currently available to Irish mortgage customers. It will mean that many home buyers may be able to have a fixed rate for the full term of their mortgage.

Finance Ireland CEO Billy Kane says the long dated fixed rates will allow customers to benefit from the ’historically low interest rates now available’.

“These fixed terms combined with flexible features provide exceptional certainty for customers and are a stated priority of the Government (ref: Programme for Government),” Mr Kane said.

Indeed the lender is partially backed by the Government, with the Ireland Strategic Investment Fund (ISIF) owning 30% of the business.

“We only distribute our mortgages through regulated intermediaries which ensures that all of our customers have advice about the suitability of any product to their specific needs,” Mr Kane added.

The fixed rate terms launched by Finance Ireland are for periods of 10, 15 and 20 years. The fixed rates range from 2.40% to 2.99% (annual percentage rate of charge (APRC): 2.58% – 3.06%) depending on Loan to Value (LTV) and the fixed term period. A 20 year fixed rate mortgage for up to 90% of the value of the home is priced at 2.99% (APRC: 3.06%).

Mortgage expert Martina Hennessy, Managing Director of doddl.ie, said the provider’s new offerings were structured to appease traditional concerns about long-term fixed rate products.

“In addressing four keys ways why long -term fixed rates may appear unattractive to Irish consumers, Finance Ireland is introducing a unique offering to the Irish market,” Ms Hennessy said.

The rate will reduce over time, you can overpay up to 10% of your outstanding balance without charges, the rate is portable and there is a capped break penalty.

“Their 15 and 20 year fixed rates are products that we see elsewhere in the eurozone, where rates are lower.

“Uniquely, with this fixed-rate product, if your loan to value drops then your rate will fall over time, assuming your value holds or increases.” The fixed rate will decrease as the loan is paid down versus the property value. Finance Ireland have also said LTV (loan-to-value) driven reductions to a customer’s fixed rate will be downward only – rates will never increase even were there to be a deterioration in house value versus loan outstanding.” Ms Hennesy also sees the extra repayment option and portability as key features.

“You can pay up to 10% of your outstanding mortgage balance in every year of your fixed-rate term, without early repayment charges,” she said. “Crucially, if you stay with Finance Ireland and you move house, you can transfer the rate on your current mortgage to your new home without incurring a penalty.

“They have also included a maximum early repayment charge which caps exposure to potential large break penalties.” Joey Sheahan, Head of Credit, MyMortgages.ie described the options as a ‘big day for the Irish mortgage market’.

“This news from Finance Ireland is really likely to shake things up – both in terms of how mortgage holders approach their choice of term and rates, and in the fact that if the demand for these products are strong, other lenders will make moves to bring similar offerings on stream – if they are not already in the process of doing so,” he said.

The Finance Ireland news was followed by an announcement from Avant Money, which launched Ireland’s lowest four and ten-year fixed rate mortgages and reduced rates on its existing seven-year fixed rate product. The new ten-year fixed rates will start from 2.1%, with four-year fixed rates starting from 1.95%. These rate reductions from Avant, which has caused a major stir since entering the Irish market last year, have been described by the Association of Irish Mortgage Advisors as ‘very good news for mortgage customers’.

These announcements won’t solve the massive issues of cost and supply in the Irish housing market but it does mean more choice available to those in a position to take out a mortgage.

Source: https://www.irishexaminer.com/lifestyle/healthandwellbeing/arid-40291547.html

 


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