Housebuilding group Abbey: Bring back 95% mortgages

Housebuilding group Abbey has called for the reintroduction of 95% mortgages and some relaxation in the Central Bank’s controversial lending rules as a way of reviving the residential property market.

Speaking yesterday, on the back of a strong set of annual results, Abbey’s executive chairman Charles Gallagher said while he has no real problem with the Central Bank’s caps, the introduction of 95% mortgages for first-time-buyers on transaction values of up to €250,000 would be a major help; adding that “allowing first time buyers to buy their first house is important and reasonable”.

Barclays, in the UK, recently became the first lender to do away with deposit rules and resurrect 100% mortgages since the financial crisis in 2008.

Here, the Central Bank has indicated that its mortgage borrowing rules — deposit levels having to cover 10%-20% of total transaction value — will not be changed upon review in November.

While Mr Gallagher is not against Central Bank action, he suggested the regulator has “tightened the tourniquet too tight” with its latest rules and said that the continued recovery of the banks, the economy and household confidence are key to a functioning housing market.

Abbey yesterday reported a 25.2% increase in annual pre-tax profits — for the 12 months to the end of April — to €61.5m; and a 28% rise in revenue to €220.6m.

It completed 597 sales — 544 in the UK — during the year and embarked on its largest spree of Irish-based activity for some time with four development projects at varying stages.

While diminishing UK consumer confidence — in the face of the Brexit vote and the devaluing pound — is a concern, Abbey said it expects another increase in UK sales this year and has budgeted for an increase in activity.

Davy Stockbrokers has suggested that Brexit and sterling effects could cut 9% from Abbey’s current year profits, but Mr Gallagher said the company is currently trading well and has made a solid start to the year.

He said prospects in Ireland seem bright, but Brexit has cast a “considerable shadow” over both here and the UK and its impact will emerge over future reporting periods.

“The group is, with its strong balance sheet, well-placed to cope with the uncertainty and hopes to continue to make steady progress,” he said, but added that “there is no doubt that the referendum outcome is a material short-term negative shock.”

Mr Gallagher added that the Brexit effect could see Abbey invest more in its Czech Republic-based operations, which contributed well to last year’s earnings.