Lenders want comfort on security before joining First Home scheme

Non-banks are lining up to get on board but concerns about who would have priority in event of default

Finance Minister Paschal Donohoe and Housing Minister Darragh O’Brien on a site visit to O’Devaney Gardens in Dublin. Photograph: Brian Lawless/PA Wire

Minister for Finance Paschal Donohoe (left) and Minister for Housing Darragh O’Brien during a site visit to O’Devaney Gardens in Dublin. Picture date: Friday July 8, 2022. PA Photo. See PA story IRISH Housing . Photo credit should read: Brian Lawless/PA Wire

Minister for Finance Paschal Donohoe (left) and Minister for Housing Darragh O’Brien arriving for a site visit to O’Devaney Gardens in Dublin. Picture date: Friday July 8, 2022. PA Photo. See PA story IRISH Housing . Photo credit should read: Brian Lawless/PA Wire

Minister for Finance Paschal Donohoe (second right) and Minister for Housing Darragh O’Brien (right) during a site visit to O’Devaney Gardens in Dublin. Picture date: Friday July 8, 2022. PA Photo. See PA story IRISH Housing . Photo credit should read: Brian Lawless/PA Wire

Finance Minister Paschal Donohoe and Housing Minister Darragh O’Brien on a site visit to O’Devaney Gardens in Dublin. Photograph: Brian Lawless/PA Wire

Minister for Finance Paschal Donohoe (left) and Minister for Housing Darragh O’Brien during a site visit to O’Devaney Gardens in Dublin. Picture date: Friday July 8, 2022. PA Photo. See PA story IRISH Housing . Photo credit should read: Brian Lawless/PA Wire

Minister for Finance Paschal Donohoe (left) and Minister for Housing Darragh O’Brien arriving for a site visit to O’Devaney Gardens in Dublin. Picture date: Friday July 8, 2022. PA Photo. See PA story IRISH Housing . Photo credit should read: Brian Lawless/PA Wire

Minister for Finance Paschal Donohoe (second right) and Minister for Housing Darragh O’Brien (right) during a site visit to O’Devaney Gardens in Dublin. Picture date: Friday July 8, 2022. PA Photo. See PA story IRISH Housing . Photo credit should read: Brian Lawless/PA Wire

Finance Minister Paschal Donohoe and Housing Minister Darragh O’Brien on a site visit to O’Devaney Gardens in Dublin. Photograph: Brian Lawless/PA Wire

Jon Ihle

July 09 2022 02:30 AM

Credit unions and non-bank lenders are keen to get involved in the Government’s new shared home equity scheme after being left out of the launch this week.

Mortgage market sources told the Irish Independent that new participants were lining up to join First Home, which provides housing finance in exchange for an ownership stake, after its opening phase once certain operating issues were ironed out.

“It was always envisaged that the banks would go in first,” said one source. “The non-banks will come on board in about six months.”

It is understood that non-bank lenders, such as Finance Ireland, Avant Money and Dilosk/ICS, are looking for changes to the entry requirements that would give comfort to the wholesale funders that finance their loans.

Sources said there were concerns about who would have priority in the event of a loan default and repossession.

The three anchor participants – AIB, Bank of Ireland and Permanent TSB – came on board at the beginning of the year under pressure from the Government as Housing Minister Darragh O’Brien was determined to meet a July deadline to launch the initiative as outlined under the Housing For All plan.

The main banks together committed €200m to First Home to match an equal amount of funding from the Department of Housing, seeding a new independent state agency run by newly appointed CEO Michael Broderick.

Sources said the non-bank lenders were invited later, but not in enough time to be part of the launch of the scheme, which took place Thursday.

One source said a political decision was made to launch by a certain date and that lenders had to be in place as soon as possible, but that those left out of the launch were not being left out of the scheme.

That gives the participating banks a first-mover advantage in the competitive first-time-buyer market. However, as First Home is limited to borrowers of the participating lenders, that means someone with a home loan from a non-bank or credit union is excluded from the new scheme.

The plan is for First Home to help 2,000 buyers a year bridge the gap between their deposit and mortgage, meaning the banks will have first crack at this segment of the market.

The scheme provides funding of up to 20pc of a home’s value, within certain price limits. In exchange, First Home takes an equal ownership stake in the house, which can be paid off over time.

The hope is that housebuilders will begin building to the specifications of the programme, thus providing housing in the “missing middle”.

A similar scheme in the UK increased supply of homes in the targeted segment by 14pc.

It is understood that credit unions and non-bank lenders, which together have about a 10pc market share, might be let into the scheme with a smaller capital requirement than the banks.

The scheme is being administered by Australian loan servicing firm Link via its local subsidiary BCM Capital, which won the contract late last year.