Banks ‘are cherry-picking best mortgage customers’

BANKS have been accused of “cherry-picking” who they want to give mortgages to as brokers claim people can’t secure loans despite the number of applications increasing.

This news comes as figures from the Central Bank show that demand for loans from households for house purchases increased marginally during the second-quarter of this year whereas the demand for consumer lending decreased.

Operations manager with Irish Mortgage Brokers, Karl Deeter said banks will claim they are lending but on the ground it’s an “entirely different story”.

“They don’t want to know except where you are a public sector worker or the type of person who banks would always lend to anyway,” he said.

“With figures showing that 80% of mortgage applications are being rejected, it puts the banks in the enviable position of being able to cherry-pick only the best applications, declining even cases that fit criteria but are marginal.

“This is contrary to giving the taxpayer back a return on our national investment because they need to lend to make profit, but equally, our pillar banks are charging artificially low rates versus the rest of the market, so not only are they cherry-picking but there is an implicit subsidy being paid to those who borrow via taxpayers who fund the banks. It’s a crazy set-up,” he added.

Lending is on course to reach a 40-year low this year, according to the director of the Irish Mortgage Corporation, Frank Conway. He estimates there could be fewer mortgage transactions than at any point since 1971.

“I estimate we have received about a 30% increase in mortgage applications this year. So, lending is falling while applications are increasing,” he said.

“Some lenders claim that they are approving more loans, but I suspect that the pre-vetting of clients is a major factor. What I mean is that many first-time buyers may not even actually apply for a mortgage based on their situation. So, while some lenders may say they are approving more loans and technically, this may be correct, I also expect that pre-vetting applicants means many do not actually submit an applications. Besides, the actual draw-downs speak for the mortgage market — it is dead,” Mr Conway said.

“Until we have a functioning banking sector, the property market and the first-time buyer market will remain in a state of extreme flux,” he added.

Economic adviser to Ernst & Young, Neil Gibson said: “We expect that credit conditions will become more difficult in the coming weeks but it is difficult to call whether this is a short-term blip caused by the anxiety in the eurozone and the US government debt wrangle or something more fundamental.

“Activity and volumes over the summer will be thin so it will be September before we really know.”

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