State mortgage plan branded 'sub-prime' as payments rise
Published 06/05/2011 | 05:00
THE interest rate charged on a government-backed mortgage scheme for people refused a home loan by the banks has shot up in a move that will cost its mortgage holders an average of €75 a month.
It comes as Home Choice Loans, which are only available to prospective buyers who have been refused by at least two lenders, increased its standard variable rate by 1.3pc to 4.2pc.
This means these mortgages will go from being the cheapest to one of the more expensive standard variable rates.
The rise is more than 10 times the 0.25pc interest rate increase announced last month by the ECB.
The scheme was branded a "sub-prime" scheme by critics.
It is aimed at first-time buyers or those building their own homes.
An initial €500m was ring-fenced by the Government for the scheme, which could rise to €1bn.
The maximum loan is 92pc of the market value of the property. The maximum loan amount is €285,000.
To qualify, applicants must earn over €35,000 as a single applicant and more than €45,000 combined income as joint applicants.
Independent Mortgage Advisers Federation spokesman Michael Dowling, who had helped design the scheme, dismissed it yesterday as a flop.
He said there had been a very poor takeup.
A spokesman for the Department of the Environment said that 129 applications had been made. Of these, 22 have been approved, with 10 loans now drawn down.