80% of mortgage applications are refused

FOUR out of five mortgage applications are being refused by financial institutions, according to a survey of brokers.

In a week when economists warned house prices will recover only when banks start lending, when it comes to getting a home loan, two-thirds of brokers believe the situation is worse than this time last year.

It is also taking longer to close loans, with two-thirds of brokers saying it now takes four months or longer, up almost 6% on the first quarter of the year.

A survey from the Professional Insurance Brokers Association (PIBA) found half of brokers claim up to 80% of mortgage applications were declined by lenders in the second quarter of this year, compared with 42% in the previous quarter.

PIBA director Rachel Doyle said the results are “disappointing but not surprising”.

“The banks are largely unwilling to lend for mortgages,” she said. “The lending situation has gone from one end of the spectrum to the other, from excessive lending to a dearth of lending. No one is suggesting that lenders should go back to the era of irrational lending. What is happening now is the direct opposite. People who have a strong capability to repay are being refused loans under various guises. The banks are putting impediments in the way of applicants. We are still a long way off having a normal functioning banking system.”

Reasons for refusal include a lack of job security, no saving history or a bad credit rating.

Bloxham stockbrokers said house prices could rise by as early as 2013 by around by 3% or 4%. It said, however, that any rise over the next few years is likely to be in low single digits.

Ronan O’Driscoll of Savills real estate said he agrees some house price growth is likely over the next five years, with modest single digit growth likely.

“The level of growth will be sectoral, and we expect houses in mature city locations to show positive growth ahead of rural houses and all apartments,” he said.

Meanwhile, NAMA chief executive Brendan McDonagh said the outlook is cloudier for Ireland’s residential property market than its commercial market due to its dependence on the real economy and the overall outlook for employment, net pay and interest rates.

House prices have fallen for 43 months to just over half their 2007 peak.


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