Lender puts 50pc mortgage limit on rural purchases
A LEADING lender was accused of writing off rural Ireland after it emerged it will only fund half the value of investment properties in smaller towns and country locations.
By contrast First Active is prepared to fund larger loans, of up to 70pc, for investors buying properties in the bigger cities.
First Active told brokers it will now only approve the larger investment mortgages for properties in Dublin, Cork, Galway, Limerick and Waterford.
"This requires a property to have a city address, ie not County Waterford," the lender said.
In areas apart from cities, First Active will only fund 50pc of the value of the residential investment property, brokers were told.
The move has raised fears that other lenders will follow suit, meaning the affordability of property could become constrained by its location. It's also feared the move could create negative equity for households in rural areas.
Karl Deeter, operations manager of Irish Mortgage Brokers, said: "They [First Active] are not willing to take a risk on rural locations, which indicates they have no faith in anything outside of the cities."
Dermot Jewell, chief executive of the Consumers' Association, last night accused First Active of setting a dangerous precedent and called on the mortage provider to reverse its move.
The new lending rule is the latest attempt by banks and building societies to tighten up their lending criteria. Lenders have also continuously raised interest rates as they attempt to dampen down demand.
A spokeswoman for First Active said the changes to its lending policy for investment properties were made to take account of the current property market environment.