Advocate urges no change in mortgage rules

A leading mortgage advocate has said the rules restricting lending are not punishing first-time buyers and that the Central Bank should not change them significantly.

Brendan Burgess, of the Fair Mortgage Rates Campaign, said the rules, brought in 19 months ago, are doing what they set out to do — protecting consumers from a surge in house prices when there is little supply of new homes on the market.

In his submission to the Central Bank, which is conducting a review, Mr Burgess urges the regulator to stand fast and calls for “no fundamental change” to the rules.

There is “no evidence that the Central Bank rules are preventing first-time buyers getting on the housing ladder”, said Mr Burgess.

“Allowing a return to reckless borrowing is not in the interests of consumers,” he said. “It would simply push up house prices and the size of people’s mortgages. It would not solve the problem of housing supply.”

The rules have, nonetheless, stirred a storm of controversy within the mortgage industry.

The Professional Insurance Brokers’ Association (Piba) has repeated its call for an overhaul, saying that 90% of financial brokers believe the Central Bank’s mortgage deposit rule and income limit are “too onerous”.

My submission on CB Mortgage Limits is at https://t.co/E3bbzYNrPH Working fine - only minor tweaks needed. On @cooper_m tonight at 5 pm

— Brendan Burgess (@BrendanBurgess) August 31, 2016

The industry group wants the existing, 90% loan-to-value for first-time buyers, of €220,000, to be increased to €300,000, and for the 80% loan-to-value ceiling for non-first time buyers also to be lifted to 90%.

It also wants the loan-to-income rule to be increased to four times gross salary, from the current level of 3.5 times salary limit, and wants mortgage lenders to be allowed to lend more when the borrower has mortgage insurance.

Following huge rent increases, Piba said it was still cheaper to buy a home in many parts of the country.

“Home ownership has always been an important contributory factor towards growth in personal wealth over the longer term,” said Rachel McGovern, chief operations officer at the brokers’ group.

“That is particularly the case where house prices have dropped considerably and interest rates are at low levels.

“Home ownership, once achieved at affordable prices, underpins sustainability and good financial planning.”

However, Mr Burgess said an analysis of first-time buyers facing difficulties in raising mortgage loans showed they had not qualified because of the banks’ own credit rules.

“None was due to the Central Bank’s limits,” he said.

Out of 42 respondents on the askaboutmoney.com website, more than half cited their own poor credit records, employment issues, and affordability of the property as the reasons for failing to qualify for a mortgage loan.

“Even if the Central Bank’s limits had not been in place during the period, these borrowers would still not have been able to get mortgages,” Mr Burgess said.

His analysis of non-first-time buyers showed that only two of 29 respondents cited the mortgage rules as reasons for failing to qualify for a home loan.

Separately, Central Bank figures showed a continuing fall in the level of outstanding mortgages, with €1.5bn more paid back to lenders than was advanced in new loans in July, from a year earlier. Non-housing loans for consumers also declined.