More than half of applicants for government home loan scheme rejected

The Rebuilding Ireland Home Loan is designed to provide an opportunity for mortgage applicants who have been unsuccessful with other lenders. Picture: iStock

More than half of applicants for the Government's affordable home loan scheme have been turned down, according to new figures.

The Department of Housing said 1,542 valid applications had been received to the end of November for a Rebuilding Ireland home loan, of which 827 had been turned down, with 715 approved.

The scheme, which launched in 2018, is aimed at first-time buyers who have a deposit and the capacity to repay a mortgage but who have been unsuccessful with other lenders in securing a mortgage.

The Housing Agency provides a central support service that assesses applications for the Rebuilding Ireland Home Loan on behalf of local authorities and makes recommendations to the authorities to approve or refuse applications. Those recommendations are then considered by the credit committee in each local authority, which issues decisions.

While the Covid-19 pandemic may have had an impact, the Government also increased the cost of the scheme, increasing the rate at which applicants could borrow from 2% over 25 years to 2.75% over the same period.

According to the department, among the reasons for rejecting applicants are unsatisfactory savings records or financial management, and applicants not demonstrating a capacity to repay.

Mike Allen, Director of Advocacy at Focus Ireland, said the reduction in approvals may ultimately cost the Government elsewhere. He said while no clients of Focus Ireland had become homeless due to not receiving a Rebuilding Ireland home loan, it did mean some people were "stuck" in the rental market, adding that it was a "dilemma" for the Government.

"There are no rules or regulations which say you can't pay that level of rent because you can't sustain it, but when you look for a State loan to buy somewhere all sorts of questions are asked about what is sustainable," he said.

Mr Allen said no one wanted a return to the days of unsustainable mortgages being issued, but in some cases it may be more beneficial to the taxpayer to issue a loan rather than have to provide other supports.

"It's a genuine dilemma for government," he added.

The final decision on loan approval is a matter for each local authority and its credit committee on a case-by-case basis and applicants who are turned down can appeal that decision to the local authority.

However, indications from some local authorities suggest very few appeals are progressed.

Dublin City Council said it has received 206 applications from January to November 2020, with 125 cases approved and an additional 27 approved after addressing the underwriters’ concerns. Another 18 cases are currently being reviewed by the underwriters and 36 were declined. Dublin City Council said just two of those 36 rejections were appealed and, in both cases, the initial refusal was upheld.

New Year is a time for change and we want our Government to make a new resolution - a commitment to #endinghomelessness https://t.co/445l3jKV0D

— Mike Allen (@MikeAllenFI) December 28, 2020

There have been significant falls in the number of loans approved elsewhere. Last year, Cork City Council approved more than 70 loans but had approved only four in the first half of this year. Cork County Council approved 16 loans in the first half of this year, also down on the amount granted in the same period last year.

David Hall, CEO of Irish Mortgage Holders, said the situation with the home loans showed "there is no flexibility" and that the State would actually save money in some instances by granting loans.

"Ultimately, there is no joined-up thinking," he said.

One area that did grant more loans than it declined was Cork County Council, which received 118 valid completed applications, approving 56 and turning down 40. There were three appeals to the end of November, two of which were refused.