Families reveal how mortgage draw downs being refused if in receipt of Covid 19 wage subsidy

Banks and some local authorities are preventing people in receipt of the State’s Covid-19 wage subsidy from drawing down their mortgages.
Families reveal how mortgage draw downs being refused if in receipt of Covid 19 wage subsidy

Banks and some local authorities are preventing people in receipt of the State’s Covid-19 wage subsidy from drawing down their mortgages.

A number of prospective home buyers across the country with loan or mortgage approval from different banks have spoken of their fears of losing substantial deposits or of losing their dream home if the purchase falls through.

In one case, a couple with a combined income of over €100,000 and who are renting pending their house purchase say they are at risk of homelessness if they can not close the deal soon.

A couple trying to borrow from a local authority risk losing a €30,000 deposit, while in another case, a couple fear losing a deposit of €30,000 because of their bank’s stance.

The temporary wage subsidy scheme was introduced by the Government, along with the €305 pandemic unemployment payment welfare scheme, as part of a raft of emergency measures at the beginning of the pandemic to help preserve jobs and incomes.

The wage subsidy scheme helps companies pay the wages of workers, with the State generally covering up to 70% of the salary of affected employees earning below €76,000.

The €350 unemployment payment is paid to people who lost their jobs as a result of the pandemic.

The Irish Examiner published details last month of a couple with mortgage approval who were refused their loan drawdown because one of them was in receipt of the Covid-19 wage subsidy.

Their financial institution told them it will review their drawdown process when the affected employer can meet the full affected salary without State support.

They raised their plight with Fine Gael TD Colm Burke, a solicitor, who said he had been contacted by a number of people in similar situations afterwards.

“I’m not sure why the banks need to be so difficult on this,” said Mr Burke.

"These people are all in safe, secure jobs. They just happen to have been caught up in the Covid-19 situation through no fault of their own and their employers need some support.”

Mr Burke warned that the banks’ stance could have a knock-on effect on the economy as lockdown restrictions ease.

“The block on mortgage drawdowns here could cause a cashflow problem for vendors, auctioneers, builders, and it will just kick the problem on and on.”

Mr Burke said he has seen some positive signs of movement on the issue following a meeting of the five main banks with the Taoiseach and the Finance Minister last week, but added that the banks need to do more to help customers.

It is estimated that 53,900 employers have registered for the wage subsidy scheme, with more than 464,000 people in receipt of wage subsidy payments, which is estimated to have cost €936m.

The wage subsidy scheme and unemployment payment were due to last three months but both are likely to be extended.

The Government said decisions on how long will depend on how the country emerges from lockdown in the coming weeks.

Niamh and Ray

Purchase price: €310,000

Mortgage: €270,500

Niamh and Ray are living with relatives and have no rental expense.

They are saving €1,500 a month.

Their mortgage repayments will be €1,050 a month.

Their house purchase contract is signed. It is unconditional.

They have paid a €31,000 deposit.

If they can’t draw down the loan, they will lose the refund.

Ray works fulltime in IT. He can work from home and his salary has not been affected.

While Niamh is not working at the moment, her employer is paying her full salary, thanks to the Covid-19 wage salary support scheme.

The house they want to buy is near completion.

However, because they have not drawn down the loan within the time period set out in the letter of loan offer, their mortgage broker has told them that they may have to reapply for a new loan.

They have also been told that the bank will not allow the loan to be drawn down while her employers are in receipt of the wage subsidy.

Patrick and Marian

Purchase price: €195,000

Borrowing: €175,500

Patrick and Marian pay €900 rent a month.

Their mortgage repayment would be €692.29, €208 less than what they are paying in rent.

Patrick works fulltime, and has moved to a higher paid job since they were granted loan sanction.

Marian’s employer has availed of the Covid-19 wage support scheme.

They have paid a deposit of just under €20,000. It is secure.

Their financial institution, Finance Ireland Residential Mortgages, has blocked the mortgage drawdown until Marian’s salary can be paid without state support.

The couple say even if Marian became unemployed, they have provided documents to prove they have enough income to repay the €692.29 mortgage.

The couple has a child with special needs and they need urgently to move to more appropriate accommodation.

Now they are at risk of losing out on the sale.

Sarah and Alan*

Purchase price: €305,000

Borrowing: €274,500

Sarah and Alan hope to borrow from a local authority.

They have paid a deposit of €30,500.

Alan has a fulltime job and has taken on overtime during the pandemic, because of the nature of his work, which has surged over the last seven weeks.

He is now working six days a week to keep up with demand.

Sarah has been temporarily laid off and is in receipt of the €350 weekly Covid-19 welfare payment.

Her employer has issued her with a letter confirming that she is still employed with the company and her contract will be resumed as soon as the company resumes operations when the lockdown restrictions ease.

They have offered the local authority six months of repayments in advance that would be retained as a bond.

They have offered to continue to make repayments and if they default at any time over the next three to four years, the local authority would be entitled to draw on the bond.

*All case study names have been changed

Mary and John

Purchase price: €332,000

Borrowing: €265,600

Mary works in a senior position in a multinational and is on full salary.

John works for a company which is availing of the salary support scheme to pay his full salary.

The bank, AIB, has been furnished with letters confirming that his job is secure.

Their total annual earnings are in excess of €100,000.

They have mortgage protection and life insurance in place.

They have now been advised that they will have to wait until John’s salary can be paid without state support before they can draw down the loan — 80% of the value of the property.

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