Wednesday 22 November 2017

Changes to lending rules will spur price increases – AIB boss

AIB chief executive Bernard Byrne. Photo: Mark Condren
AIB chief executive Bernard Byrne. Photo: Mark Condren
Michael Cogley

Michael Cogley

AIB boss Bernard Byrne has said he expects the changes made to the Central Bank's mortgages rules to spur "necessary price increases" to entry-level houses across the country.

Mr Byrne was speaking at the Oireachtas Finance Committee where he said the move introduced by Governor Philip Lane will have a positive impact on the market.

“One of the comments would have come from construction was prices were too low to justify development of new builds.

“I think there’s an element of pricing for first-time buyers that will have to rise in order to attract supply into the marketplace,” Mr Byrne told the committee.

The Central Bank announced changes to its mortgage lending rules for first-time buyers on Wednesday that means those taking their initial step on the property ladder will need to raise 10pc of the purchase price.

This differs from previous rules introduced by the State’s financial regulator last year, which meant first-time buyers were required to save 10pc of the purchase price up to a maximum of €220,000 and 20pc of the balance thereafter.

Mr Byrne praised the amendments to the rules and said it was likely to have a “positive impact” on the sector.

In a wide ranging session executives from AIB, including head of financial solutions Jim O’Keefe and retail, corporate, and business banking MD Robert Mulhall, faced questions on the number of cases in arrears, its high level of non-performing loans, and its participation in solving the housing crisis.

Mr Byrne told the committee that 14 mortgage holders had lost their homes on account of not having the right tracker rate attached to their home loans.

Around 2,600 mortgage account holders have been written to after being overcharged on their loans, the AIB boss said. The bank, which is 99.9pc owned by the State, has set aside €190m to cover the costs after the bank denied thousands of customers a tracker rate.

In an attempt to “right size” the positions of customers in arrears, Mr Byrne said the bank had written off €1.3bn in mortgage debt since 2008.

“We have about 37,000 mortgage structures in place we have about 13,000 customers past due in our private dwelling, which points to a still very significant number of customers in difficulty,” Mr O’Keefe told the committee.

Sinn Féin TD Pearse Doherty said it was “criminal in the extreme” the bank had not acted in an aggressive way to use the 569 vacant houses on its books to address the housing crisis.

“We have made available the full listing of 500 properties through the Housing Agency at this point and we’re working very actively to make sure we see those through to the agency,” Mr O’Keefe said.

Mr Byrne said the bank’s performance in the summer’s Europe-wide stress tests made it “obvious” that it needed to address its non-performing loans.

The bank’s chief executive also said his institution is ready for a Government decision on the sale of the bank, which will be decided up on finance minister Michael Noonan.

The protracted public listing of the bank has continually been delayed, most recently due to economic factors such as Donald Trump and Brexit that have led to uncertainty in global markets.

Online Editors

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Promoted Links

Also in Business