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Central Bank boss defends banks withdrawing mortgage offers

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Gabriel Makhlouf

Gabriel Makhlouf

Gabriel Makhlouf

Central Bank Governor Gabriel Makhlouf has defended banks that are withdrawing mortgage offers to people whose incomes are hit by the fall-out from the pandemic.

He said there is potentially a risk that some people will find themselves unable to complete house purchases.

He insisted “it’s in everyone’s interest that banks make prudent lending decisions... unlike the reckless lending of the past”.

The Governor was asked on the ‘Today with Sean O'Rourke’ show on RTE about reports in the Irish Independent that banks and other lenders are putting the house deposits of home buyers at risk as they have tightened lending criteria due to the Covid-19 outbreak.

Brokers report they are asking people if they are receiving the Pandemic Unemployment Payment or the Temporary Wage Subsidy.

Some lenders who are told that people have temporarily lost their jobs are withdrawing loan offers and approvals in principal.

This has meant that prospective homebuyers are being put at risk of losing their deposits due to problems which have arisen since Covid-19 lending checks introduced by banks.

The Law Society has reported that clients committed to buying property have been encountering difficulties drawing down loans already approved by lenders.

The issue has arisen after the Banking and Payments Federation Ireland (BPFI) issued new guidance about mortgage approvals and the drawdown process on April 20.

Mortgage broker Michael Dowling said banks are seeking proof that people have not been laid off by demanding to see April payslips.

He said the approach of lenders is inconsistent, with some banks withdrawing loan offers full stop, while others are being flexible.

It comes as a number of banks, including Bank of Ireland, KBC, Ulster Bank and Dilosk/ICS, have temporarily suspended offering exemptions from strict Central Bank lending rules on the size of deposits and the amount that can be borrowed relative to income.

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