Self-employed hardest hit as eight in 10 refused a mortgage
Published 26/04/2011 | 05:00
BANKS are making it harder than ever to get a mortgage by clamping down on the self-employed and contract workers securing a homeloan.
Brokers say it was harder to get a mortgage in the first three months of this year than it was last year despite the effective nationalisation of the banking sector and the tens of billions of euro pumped into Irish banks.
More than two-thirds of independent mortgage brokers surveyed by the Professional Insurance Brokers Association (PIBA) say the situation was either "worse" or "much worse" in the first three months of this year compared to the same period last year.
Just 6pc of brokers saw an improvement. Between 60pc and 80pc of mortgages are being refused, according to two-fifths of the brokers.
"The absence of a functioning banking system is continuing to stymie any underlying demand," said PIBA mortgage services director Rachel Boyle.
The news follows several government initiatives aimed at boosting lending.
NAMA was created in 2009 to buy bad debts from the banks in a bid to shore up the lenders' balance sheets. This was followed by legislation to force Allied Irish and Bank of Ireland to lend €1.5bn each to businesses, and then by the effective nationalisation of AIB earlier this year, along with the EBS Building Society and Irish Nationwide mortgage lenders .
The main reason for mortgage refusals is job security -- either the applicant has not been in current employment for a sufficient time or their employment is a fixed contract rather than permanent, according to the brokers.
Mortgages are also taking longer to arrange than six months ago. More than 90pc of brokers say it is now taking at least three months to complete a mortgage.
While would-be home owners are still without any help from the Government or the State-owned banks, the government's adjudicator on lending to small and medium enterprises said he expected some sort of guarantee to be introduced next month to help companies borrow. "Like everyone else, I expect a loan guarantee scheme to be announced with the upcoming 'jobs budget'," Credit Review Office boss John Trethowan said.
Mr Trethowan said he was revamping the organisation's complaints service for small- and medium-sized companies that have been turned down by AIB and Bank of Ireland.
The Credit Review Office has been criticised in the past for being too time-consuming and difficult for struggling companies, which need to spend as much time as they can looking after their business rather than dealing with administrative issues.
Mr Trethowan said he hoped the new method would encourage more SMEs to use his office.
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