Business Irish

Wednesday 24 April 2019

BoI says it's lending to first-time buyers and rent funds

Bank of Ireland CEO Francesca McDonagh.
Bank of Ireland CEO Francesca McDonagh.
Donal O'Donovan

Donal O'Donovan

BANK of Ireland said it is happy lending to both home buyers and build-to-rent landlord funds as a mix is needed in the market.

A shortage of overall supply was the key failure in the residential market, chief executive Francesca McDonagh told the Oireachtas Finance Committee yesterday.

But the bank boss admitted that rent prices in Dublin now averaged €1,600 a month and had become unaffordable for many.

Officials from the bank said the cost of renting a €350,000 property in Dublin is €2,000 a month, but would be €1,200 to buy with a mortgage.

Asked whether ordinary buyers were being pushed out of the market, Ms McDonagh said rental funds had bought an estimated 15pc of the 57,000 homes sold nationally last year, with most sold to other buyers.

With renters struggling to save, the bank said it would welcome an extension of the Government's Help to Buy Scheme - which gives a tax rebate to first-time buyers to boost their deposit.

That scheme is due to run out at the end of the year.

Meanwhile, Bank of Ireland needs to keep cutting its level of bad loans because capital requirements are so onerous, if it is to lend more into the economy, Ms McDonagh said.

"In common with all banks, our regulators have set out the capital requirements we must adhere to" in respect of NPLs, she said.

"This includes holding up to 10 times more capital against certain impaired mortgages compared with others that are current with their repayments."

The bank is currently working to cut its non-performing stock from 6.3pc of total loans to 5pc and below, including bundling a stock of €375m worth of mortgages that were previously in arrears off its balance sheet through a so-called securitisation deal on the bond market.

With the risk of a hard Brexit looming, Ms McDonagh said that stress tests last year by the European Banking Authority have provided evidence that it can manage in a severe downturn.

Irish Independent

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