Banks are ‘massaging’ lending figures

The banks are massaging their mortgage lending figures in an effort to meet their targets, according to members of the country’s leading brokers’ organisations.

Karl Deeter from Irish Mortgage Brokers said: “The banks are spoofers. We can see as brokers from the amount of mortgage application rejections that they are not lending. For example, Permanent TSB claims it is going to lend €350m this year. They don’t have the money to make that sort of lending.”

At the start of the year both AIB and Bank of Ireland announced they would make €2bn each available in new mortgage lending this year.

Felix O’Regan, director of public affairs at the Irish Banking Federation (IBF), rejects the claims that banks are not lending.

“The monthly IBF Mortgage Approvals Report, which tracks the number of new mortgages approved by banks, shows that the level of new mortgage approvals has increased each month since the beginning of the year.

“The latest figures confirm that 1,722 mortgages were approved during May 2013, which represents an increase of 20% over the previous month and 5% year-on-year.

“The indications are that, when the figures for June are compiled and published late next week, they are also likely to show a healthy pipeline. The vast majority of mortgage approvals, over 90%, are for property purchase.”

However, Rachel Doyle, chief operations officer at the Professional Insurance Brokers Association (PIBA), says there is a growing difference between the value of mortgages that the banks’ sanction and the level of draw downs.

In other words, the banks will agree in principle to sanction a mortgage application, but it will attach very stringent conditions to the mortgage, which means that the money is never drawn down, says Ms Doyle.

Another practice is to part sanction a mortgage and leave the applicant to source the remaining funds needed to meet the asking price. In both cases the sanctioned mortgages go towards their lending figures, but the money is never drawn down.

Figures released by the IBF seem to support this argument. In 2011, the total value of mortgages sanctioned was €2,687m, which is €224m higher that the value of mortgages drawn down over the year. In 2012, the value of mortgages sanctioned was €2,997m, which is €361m higher than the level of draw downs for the year. Over the first quarter of 2013, mortgages sanctioned were €501m, which is €170m higher than the mortgages drawn down.

Investec chief economist, Philip O’Sullivan, said figures for the end of last year and the first quarter of this year were skewed because there was a surge in mortgage applicants looking to avail of mortgage interest relief before it was scrapped. Consequently, there were a large number of mortgages sanctioned that would not have been drawn down.

A spokeswoman for AIB, which includes EBS, rejected claims it is not lending. “At the beginning of 2012, AIB committed to providing new mortgage lending of at least €1bn and the bank finished the year having sanctioned €1.5bn worth of mortgages, with a total of €1.2bn drawn down by customers.

“AIB’s market share of new mortgage business in 2012 was in excess of 40% and this is being maintained in 2013. AIB is currently approving seven out of 10 completed mortgage applications.”


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