Are banks giving mortgages at the moment?

L

lynchie1978

Guest
Hi all. I am a civil servant with a partner who is self employed in the wholesale industry. I have been gifted a site and have got full planning permission on this site. My income is 40k and my partner is 45k/. we have no loans or debts.
we are looking for a mortgage of between 350 and 400k. I have brought my details to a broker who approached one bank and they have said no. My broker is telling me that i should forget about it for the next year.
Is this right? does anyone have any insight into this. I know the banks are in turmoil but surely there is money there to lend?
any insights would be great.
 
This myth that banks are not lending at the moment is exactly that - a myth. Banks will still lend to qualifying customers. Your broker evidently didn't try the right lender. Try elsewhere. You should have no problem getting the loan you need.
 
OP can you tell us which bank refused you? Is your broker trying other banks? Based on what you have posted I can't see why they would refuse you, possible the fact that your partner is self employed and therefore presumable the job is viewed as precarious by the banks in the current climate is one reason I can see for you being refused. Do you have savings? Maybe you are looking for too much. How much is the building cost and what is the 'real' value of the site.
 
Bronte said:
Maybe you are looking for too much. How much is the building cost and what is the 'real' value of the site.
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That is exactly my thoughts. What is €350~400k going to build, another McMansion? For example in the height of the boom in 2006 and in Dublin it cost €165 to build (ex bathroom & kitchen) a 3 bedroom detatched house.
 
I've got a mortgage approved in principle from AIB. They had no problem with my application.
Good rates from AIB too for first time buyers.
 
heebusjeebus said:
I've got a mortgage approved in principle from AIB. They had no problem with my application.
Good rates from AIB too for first time buyers.
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Not to rain on your parade but I'm not happy with the very very low introductory rate for first time buyers as I think it's lulling them into a false sense of low payments. I hope they have stress tested you. Would you mind telling us your salaries, deposit and purchase price so we can get an idea of what banks are looking for? I am happy for you in that you got mortgage approval. Best of luck with the house.
 

Salary is 47k, mortgage is 92% of 290,000 which is 267,000.
 
So 5.6 times income, is your employment good professional or civil servant? Also what percentage of your take home pay will the mortgage take? I didn't think they were giving out over 90% loans.
 
Bronte said:
Not to rain on your parade but I'm not happy with the very very low introductory rate for first time buyers as I think it's lulling them into a false sense of low payments.
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I don't think low introductory rates are an inherently bad thing, provided buyers realise that their payments will rise and budget accordingly. The advantage is that people buying their first homes can better afford to furnish them during that lower-rate period. Of course, low rates can also hide that the "usual" rate may be less competitive than other offers and buyers can end up paying much more over the lifetime of the mortgage.

As with all special introductory offers, they're fine if you understand them fully and use them properly. I view them like those 0% finance offers, where if you don't make the balloon payment in time you end up paying 20% interest or so: a good tool if you've budgetted to take the maximum advantage.

Mind you, 5.6 * income?
 
Bronte said:
So 5.6 times income, is your employment good professional or civil servant? Also what percentage of your take home pay will the mortgage take? I didn't think they were giving out over 90% loans.
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I'm in IT and job is secure. I wouldnt dream of getting a mortgage if there was a chance I could lose my job.
I've no credit issues, have no loans to pay off.
I'd say based on the special 1st year deal they are doing for first time buyers i'll be putting a just under a 3rd of my take home pay into the mortgage but it works out at only 100 euro a month more than what I'm paying for rent at the moment.
 
LDFerguson said:
All lenders are obliged by the Financial Regulator to stress test applications.
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I think they do this by 2% would this be on the low introductory rate or the normal variable rate? Are you finding that people are getting loans of 92% and 5 and a half times income?
 
LDFerguson said:
This myth that banks are not lending at the moment is exactly that - a myth. Banks will still lend to qualifying customers. Your broker evidently didn't try the right lender. Try elsewhere. You should have no problem getting the loan you need.
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Myth? Sorry to differ Liam but the myth at the moment is as you put it "qualifying customers"! These are scarse like hens teeth!

I am currently a broker (ex banker) and I really should be on here blowing & shouting that loans can be sourced & that the market is still open. The reality (which we all know) is unfortunately FAR DIFFERENT.

All the banks have retracted criteria (to reduce the numbers of "qualifying customers") to such an extend that a very low percentage of applications are now being approved. So while the banks can spin the PR that they are open for business the reality is that the number of loans they are approving is tiny, and the vast majority of would-be-borrowers are encountering extreme difficulties in raising finance.

The following are the realities:

  • Any first time buyer with children will struggle to get an approval unless they use PTSB (whose calculation system doesn't reduce approval amounts by a loading for having kids)
  • AIB will do 92% finance (if you can get it) otherwise the norm is now 90% i.e. most FTB's do not have the 10% deposit & have no prospect of saving this if they are renting
  • Anyone who wishes to finance an investment property has very little choice (PTSB/Bank of Scotland won't even look at applications). Average loan to value on offer is 75% i.e. an investor would need to put up 25% deposit plus stamp duty plus legal plus fit out- market is also dead on this basis
  • More alarmingly people who may now find themselves in a cashflow crisis in keeping with car loans/credit cards/mortgage etc etc will also find it very difficult to refinance. Apart from AIB the max average ltv on a remortgage is now 75% or less. With falling property values & also a number of lenders refusing to refinance short term debt some of these people are the ones missing repayments as they can no longer afford the monthly costs.
  • As for commercal property loans- this market is DEAD (not even a faint pulse left). Many lending managers have been given a ZERO lending target this year
I know you are a broker/advisor too, but rather than generalise regading "qualifying applicants" getting loans I really think we all need to accept that the banking/mortgage situation is now critical. If this market does not free up in the immediate future, then it will have massive consequences for all of us. We can no longer beleive the spin & PR of our banks as we all now know the type of institutions which they REALLY are, if the availability of credit is not maintained then we are doomed as a nation. It is our €7bn which is being inputted to these banks (is this to stimulate growth & drag us out of recession or just an "insurance" pay out to the banks balance sheets?)

I would urge any borrower who experineces a problem in getting credit from the banks to contact their local TD or representative as these people need to know EXACTLY how the banks are treating customers. Our Dail needs to be made aware of the modus operandi & criteria currently being enforced which is excluding the vast majority of borrowers. This is ultimatley what will stiffle economic growth going forward.

Sorry for the rant but I have to relay experiences at present.
 
heebusjeebus said:
I've got a mortgage approved in principle from AIB. They had no problem with my application.
Good rates from AIB too for first time buyers.
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Slightly better rate at AIB but €1000 to first time buyers at ICS.
On €267,000 over 30 years the repayments in year one would only be €250 less if you go with AIB over ICS making the ICS option €750 better.

They then both revert to similar variable rates ICS 3.20% as against AIB 3.15% making AIB cheaper by around €7 per month. Thus you would have to stay with AIB for around 9 years to make it a more attractive deal than the €1000 up front.

This is not taking into account the fact that you will get more Tax Relief on the ICS mortgage due to the higher repayments. I haven't worked this out. It's a quiet Friday but not that quiet.
 
Actually YellowBellow I think some of the restrictions you've pointed out in getting mortgages are a good thing. Sane, sensible lending is the way to go.
 
Bronte said:
Actually YellowBellow I think some of the restrictions you've pointed out in getting mortgages are a good thing. Sane, sensible lending is the way to go.
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How can it be sane or sensible for a bank to refuse to refinance a loan that a borrower is actually repaying? I have clients who owe €185k on a property valued €400k- they are on a variable rate of 4.5% & want to switch to rate of 3.15% - the repayments will actually be almost €90 per month less than currently & this was refused.

Commercial client with existing €1.5m loan against 3 commercial properties. Existing loan interest only period expired & lender is insisting on capital & interest repayments- he wanted to switch to another lender to remain on interest only. Has €250k in cash savings, bank a/c always 50k plus in credit, and excellent a/cs- only reason he wanted to stay on interest only was to keep any possible cashflow pressures off in the future as he actually wants to accelerate capital & interest repayments over the next 5 years when this downturn should have bottomed out- declined by 8 commercial lenders.

Commercial client almost identical to above- wanted to refinance to stay on interest only- no equity release or increased facility. 8 lenders wouldn't even look at it due to fact that he was in the tile wholesale business even though he had bank statements & draft a/cs to Jan 2009 to show his turnover & profitability holding. A/cs, bank statments & savings all excellent- didn't even make it past first base!

FTB- approved in principle by AIB for €195,000. AIP retracted to €160k the following day as they had forgotten that she had a child.

This is just a taste of what is going on. Let me be very clear I have been in the finance banking game for over 15 years. There is responsible lending & then there is a lending "embargo" - we are way closer to the latter than the former!

For those of us who are on the property ladder it is just a little rich for us to adopt the holier than thou attitude to lending. Young people need a start to get them going, and while I am all for sensible lending some of the tactics of the banks at present are nothing short of despicable. The really galling thing is then when you open the newspaper to be greeted by a full page advert of "propoganda" purporting to be "open for busines".
 
Commercial banks are in general still giving out funds for guys like your first case as he seems very strong, unless I'm missing something.
For the second client I can understand why he was declined due to nature of business.
However it can be frustrating dealing with them
 


I have already said that neither of these clients were approved by any of 8 commercial lenders:

AIB
BOI
BOSI
PTSB
ACC
KBC
Ulster Bank
National Irish Bank

4 actually asked not to bother sending in the application as it would be a "slow no"! I have contacts in all institutions from my years in the business & even the branch managers can now admit (albeit in private) that it is almost pointless sending commercial cases to the lending unit as there is ZERO appetite.

In terms of criteria- if you assess peoples rental income on their property investment at 50%, plus take only 70% of their net profit & then stress test that on a capital & interest basis at cost of funds plus a 5% margin- then even the sultan of brunei would struggle to get loan approval- but this is effectively what is happening.

What worries me is that how much of the capital on the banks books is being used to "roll over" developers monthly interest charges & is being "coded" as new lending by the banks to keep the figures up?

At this stage I am ultra sceptical & unfortunately cynical about this whole business as there are "untruths" being spun to deceive both us as bank customers but also our state i.e. us again as we are the ones inputting the new capital as the international credit markets don't beleive our banks anymore either!
 
In relation to the O.P's question.

The answer really is, banks are only giving out mortgages to clients that meet very stringent criteria (each bank has slightly differant criteria).

At the moment the first thing to concern yourself when applying for a mortgage is who will offer you AIP (acceptance in principle).

Given the brief details you have provided, you look like a decent candidate for a mortgage. Unfortunatley thats not always enough in the current environment.

Did your broker just try one mortgage company because he only has one agency or is it because he felt you only had a chance with one specific company!

I assume the site is down the country (possibly not in a town) as banks are slower to lend to clients looking for property outside of towns.


The most important factors when looking to take out (or alter) a Mortgage of any kind are:
  • Your Salary (combined salaries)
  • Ability to repay the mortgage (factor in loans and liabilities)
  • Satisfactory Employment record
  • Have a deposit and /or savings (min 5% first time buyers)
  • Clear Credit History
It can be frustrating being knocked back, but find out exactly the reasons why you were declined. Another company may accept your application . .
 

I know this is your job and lively hood which your family depends on so i can understand the passion in your statements.
Having said that i think you need a health dose of reality. We are just coming out of a huge asset bubble the likes of which haven't been seen before, the country is in a mess and property was a huge factor. Banks were bailed out largely because of this, bailed out with public money.
Now banks are returning to traditional lending criteria, 3.5 times main earner and 1 times second, ignoring what went on since 1999, this has always been the way and many would say lending criteria in the 1980's were much stricter.
So say a typical couple both earning 35k apply for a mortgage, that would give them a mortgage of 140k, assuming they need 10-20% deposit, that puts the house price at around 150-160k, doesn't that look like a more realistic house price, not the 260k current national average house price.
Now the real questions;
Would a couple (as example) earning 35k get a mortgage for 150k? (i know its yes, maybe not all banks but the majority)
Is it better for banks (as the last 10 years) to give mortgage on 10 times income? Is that really better for the country and future generations?
Is it better to have average house prices complety out of line with wages?

Finally, banks have gotten a whole lot stricter, but you (general) cant complain about them getting bailed out and then complain that people aren't getting mortgages. When the average house price is in line with average wages, mortgages will be more freely available, but still only those that have secure employment and can prove ability to service the loan will get them (your ability to pay currently and previously does not guarantee future ability). No one has a god give right to own a house, a point that was lost on most people during the last few years.
 
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