Big Banks accused of blocking plans to help first-time home buyers

THE big banks were yesterday accused of discriminating against young couples trying to get on the property ladder by refusing mortgages to people building houses on low-cost local authority sites.

The banks’ policy was also described as mean fisted by the chief author of a report proposing measures to reduce property prices.

Oireachtas Constitution Committee chairman Denis O’Donovan said the banks’ stance was hampering Government efforts to assist first-time home buyers.

To prevent profiteering on low-cost sites, if the home owners sell the house within 20 years, the council can claim the difference between the sale price and the market value of the site.

But AIB and Bank of Ireland both said yesterday that they did not grant mortgages in these circumstances as a result of this regulation.

AIB said it was standard policy not to grant mortgage approval when another bank, building society or local authority would have a claim on the property.

“The situation is that AIB has always had a policy not to share security in mortgage cases with any other agency, regardless of who that agency might be,” a spokesperson said.

Bank of Ireland also said it currently does not provide mortgages in these cases and knows of no other lending institution that does.

Efforts by the Department of the Environment to get the banks to grant mortgages to low-cost site holders are understood to have so far proved fruitless.

Mr O’Donovan said he has come across a number of cases where prospective home builders were initially granted mortgage approval, only for it to be revoked once the banks realised it involved a low-cost site.

Documents seen by the Irish Examiner show that AIB refused a previously approved mortgage because of the conditions imposed on the low-cost site.

“These are the big banks and it is a snub to people trying to get on the housing ladder. Here are young couples trying to make a start in life and it is a mean fisted policy blocking their path,” Mr O’Donovan said.

The report on property rights by All-Party Oireachtas committee on the Constitution, published last year after a lengthy consultation process, included recommendations to the Government to develop initiatives to assist first-time buyers.

“It will be very hard to make progress with housing provision if the banks are to persist down this track as it will hamper public policy,” the TD said.