Skip to main content

Government’s Mortgage Failure...

Property investor...


The Government’s €500 million plan to provide mortgages to those turned down by the banks is a failure....

A PLAN, sponsored by the Government, to make it easier for first-time buyers to get mortgages has flopped because of stringent qualifying conditions and needless bureaucracy.

Towards the end of 2008, when the mortgage market began to dry up because of the banking crisis, the Department of the Environment was portrayed as rushing to the rescue of young workers unable to get funding from the banks and building societies.

The €500 million mortgage plan announced by Minister for the Environment John Gormley was seen as a serious alternative for those anxious to get on the property ladder.

The grand plan, promoted as the Home Choice Loan, has turned out to be a “No Choice Loan”. The difficulties in complying with the terms has meant that, almost 18 months after the launch of the scheme, only three people in the entire country have managed to draw down mortgages (each of them for less than €285,000) from the vast fund.

Even with the poor response, the Department has so far failed to make any radical changes in the qualifying conditions to meet consumer needs. To get a loan, applicants have to earn in excess of €35,000 and more than €45,000 in the case of a couple. More importantly, they need to show that they have been refused mortgages by two banks or building societies.

Having to provide evidence of two rejections by financial institutions will always mean that the number of applications making it through to the Government scheme will be on the low side.

Not surprisingly, mortgage expert Frank Conway finds serious fault with the scheme and says it is time for it to be reorganised and rebranded. He argues that it needs to become what it says, a serious alternative to the choice of mortgages available, not just “a hidden and unknown product that even those charged with selling it are not doing”. To get the scheme working, Conway, a director of Irish Mortgage Corporation, suggests that the Department should no longer look for two rejections by mainline lenders. He also recommends that the length of mortgages should match the main lenders and be extended to 35 years.

In addition, he wants the qualifying income to be lower than €35,000 in the present difficult economic climate. Deposits coming from gifts, especially from parents, should be acceptable, he says.

He also points out that one of the key stumbling blocks to mortgage approval under the scheme revolves around the condition that the applicant must be in permanent employment for two years. Employees who return to work in the same area – like accountants, solicitors, skilled crafts and the so-called smart economy – should be considered worthy and suitable applicants.

Conway would also like to see increases in mortgage interest rates capped at, say, 6 per cent over its lifetime with a 2 per cent annual cap to protect buyers from excessive increases in repayments.

On the face of it, the scheme could be of immense benefit to many first-time buyers if the qualifying conditions were changed. Despite all the claims by the banks that mortgages are still being drawn down, estate agents are seeing little evidence of it through houses or apartment sales. Hence the stagnant market.

The Government scheme offered 92 per cent loan-to-value mortgages subject to a maximum of €285,000 on new or second-hand homes, as well as homes built by the applicant. The loan is marketed as a normal capital and interest-bearing mortgage currently set at 2.9 per cent.

It all sounds grand, but the scheme simply does not work. It is all the more surprising, therefore, that the Department came out strongly this week in defence of the scheme, pointing out that it would be “premature to remove a scheme that provides an important fallback in a still credit-constrained market”.

What a load of rubbish. Clearly the money is winging its way to Greece as we speak.


Report by JACK FAGAN - Irish Times.

Popular posts from this blog

Ireland's Celtic Tiger Excesses...

'Bang twins' may never get to run a business again... POST-boom Ireland is awash with cautionary tales of Celtic Tiger excesses, as a rattle around the carcasses of fallen property developers and entrepreneurs will show. Few can compete with the so-called Bang twins for youth, glamour and tasteful extravagance. Simon and Christian Stokes, the 35-year-old identical twins behind Bang Cafe and exclusive private members club, Residence, saw their entire business go bust with debts of €9m, €3m of which is owed to the tax man. The debt may be in the ha'penny place compared with the eye-watering billions owed by some of their former customers. But their fall has been arguably steeper and more damning than some of the country's richest tycoons. Last week, further humiliation was heaped on them with revelations that even as their businesses were going under, the twins spent €146,000 of company money in 18 months on designer shopping sprees, five star holidays and sumptu

I fear a very different kind of property crash

While 80% of people over 40 own their own home just a third of adults under 40 do. This is disastrous for social solidarity and cohesion Changing this system of policymaking requires a government to act in a way that may be uncomfortable for some. Governments have a horizon of no more than five years, and the housing issue requires long-term planning. The Department of Public Expenditure and Reform was intended to tackle some of these problems. According to its website its remit is to “drive the delivery of better public services, living standards and infrastructure for the people of Ireland by enhancing governance, building capacity and delivering effectively”. So how is the challenge of delivering homes for people in 2024 and beyond going to be met? The extent of the problem is visible in the move by companies, including Ryanair, to buy properties to house staff. Ryanair has, justifiably, defended its right to do so. IPAV has long articulated its views on how to improve supply an

Property Tycoon's Dolce Vita Ends...

Tycoon's dolce vita ends as art seized... THE Dublin city sheriff has seized an art collection and other valuables from the Ailesbury Road home of fallen property developer Bernard McNamara. The collection will be sold to help pay his debts. The sheriff, Brendan Walsh, is believed to have moved against the property developer within the past fortnight, calling to his salubrious Dublin 4 home acting on a court order to seize anything of value from his home to reimburse his creditors. The sheriff is believed to have taken paintings from the family home along with a small number of other items. The development marks a new low for Mr McNamara, once one of Ireland's richest men but who now owes €1.5bn . The property developer and former county councillor from Clare turned the building firm founded by his father Michael into one of the biggest in Ireland. He is the highest-profile former tycoon to date to be targeted by bailiffs, signalling just how far some of Ireland's billionai