Bank eases rules on mortgage lending

AIB has relaxed its lending conditions for people seeking a mortgage, in a move that will see more people qualifying.

In what experts have called a positive step, the bank has reduced the money needed to live on, after loan commitments have been met, from €1,500 to €1,250 for a single person and from €2,500 to €2,000 for a couple. Experts said this will mean more people will now qualify for a mortgage.

Operations manager with Irish Mortgage Brokers, Karl Deeter, said: “Prudent and conservative lending is important but we have gone beyond that so some loosening of criteria is good to see.

“With state ownership, it is vital that a bank is not allowed to become a zombie. Having cost €20 billion to keep alive, it is time for AIB to get lending again to both strong applicants and SMEs.”

AIB has introduced the changes on a pilot basis.

Director of the Irish Mortgage Corporation, Frank Conway, said these changes are a bit of good news for a change.

“The lender is finally adjusting its criteria to match the reality of today’s Ireland,” Mr Conway said.

“With property prices down 43%-57% and wages down significantly also, it is simply a natural fit that this lender agrees to reduce their net disposable income to match the market reality,” he added.

Mr Conway said that lending for the first half of this year was on such a low level that, on an annual basis, overall lending for 2011 is on course to fall to 1970/1971 levels.

“The property market cannot stage a recovery until such time as banks return to lending mortgages again,” Mr Conway said.

In the first six months of this year, 4,968 mortgages were granted for the purchase of a property. By comparison, at the height of the property boom, more than 111,000 mortgages were granted in 2006.

Kevin McNerney of the Trusted Advisor Group said: “This will definitely help people who want to buy a home because they feel that prices are now at such a low level that it is more affordable for them to repay a mortgage on a property than it probably will be for them to rent the same property.

“People are also keen to purchase a house and get a mortgage before the mortgage interest relief available to first-time buyers is reduced in 2012 and then abolished in 2013,” he said.

He said he hopes that this move from AIB will lead other banks to look at their current lending criteria.

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