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Hints of some movement on the domestic mortgage front

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THERE may finally be a revving up of mortgage lending happening. The 'pillar banks' show signs of powering up mortgage lending, industry sources and a reading of data in a recent Central Bank report suggest.





"There's something happening," said broker Frank Conway of Irish Mortgage Corporation, who sees "some nascent signs that a few banks are open to lending", particularly AIB. The disgraced bank may be shedding thousands of staff but it appears to be recruiting home buyers, offering the tastiest rates and deposits at present.

Though Goodbody stockbrokers economist Dermot O'Leary noted recently that home loan credit is "tight" and lending was lower than ever in 2011, he also adds: "I would think it has to improve from there. I think the pillar banks are more proactive in terms of getting out there and trying to do more."

Says another economist source: "We're hearing that new AIB CEO David Duffy has been more dynamic in terms of AIB engaging with brokers and intermediaries and being open for business."

"According to the Central Bank report, the weighted average of the cost of interest on new loans for house purchases was 3.11 per cent in January," Frank Conway said.

But why might that be significant?

Because the best mortgage rate available is a 2.84 per cent deal from AIB, but this is only on offer where the loan-to-value is 50 per cent or less.

"That weighted average rate of 3.11 per cent suggests that AIB is likely to be the major lender in the market and they are doing a fair share of lending where the loan-to-value is 50 per cent or less," he explains.

In other words, not just lending to those with chunky deposits.

Meanwhile Bank of Ireland has set out its stall, declaring it is making a €1.5bn funded play to grab more of the mortgage market this year, and sources report that Government pressure to lend is continuing to be brought to bear on the State-owned banks.

Then PTSB and AIB's tracker mortgage dead weight is expected to get cordoned off within months, potentially leaving both freer to lend more, or at more reasonable rates in PTSB's case.

So that's the goodish news, a little spring flower of hope. You still need to be a seriously good bet to get a mortgage, but at least if you are, you could get a sporting chance.

"AIB and Bank of Ireland are the primary banks lending to first-time buyers," Conway told the Sunday Independent. "Both need to see very strong evidence that applicants are capable of handling a monthly mortgage repayment and the discipline to continue paying it from month-to-month."

You also need to have a full-time job. Apart from regular savings and regular salary, the banks are checking for red flags such as constant current account overdraft or other strains. But they are factoring in overtime and bonuses where they are reflected on a P60.

AIB is lending to a maximum of 92 per cent to first-time buyers and those trading up. Bank of Ireland/ ICS will lend to 90 per cent loan to value.

KBC is lending but only in cases where the loan to value is 80 per cent or less and the buyer has a strong earning profile, and is mainly refinancing deals on existing mortgage business. Ulster Bank is not advertising mortgages hugely and its interest rates are not enticing.

As an attempt at a snapshot of some of what's happening in mortgage lending, we've profiled five recent homebuyers and the criteria that won them mortgages in this still seized-up lending market. Some details have been changed for privacy reasons.

Family relocating

A couple in their late 40s with two young children and a car loan, moving from Wexford to Cork, sold their Wexford home to buy in the rebel city as the husband's job was transferring there. The husband is the sole breadwinner.

They were able to get a €210,000 mortgage on a three-bed semi for 60 per cent loan-to-value. Their original mortgage was with Permanent TSB (PTSB); their new mortgage with Bank of Ireland.

The bank approved the loan as the couple's credit history and mortgage repayment history was good and there was no debt consolidation.

First-time buyers

A young couple, he works in the pharmaceutical sector as a chemical engineer for over four years, she is unemployed. They had a 10 per cent deposit and no car loan or credit card debt. They got a €240,000 mortgage for a three-bed semi with Bank of Ireland's ICS.

Couple where main earner is overseas

A common scenario in this climate. The husband is working in the Middle East, the wife and children are at home.

The husband is the main earner but both are working. He changed jobs within the past 12 months but for employment in the same sector with better earning power.

Their €368,000 mortgage loan to buy a period home with AIB was approved for 92 per cent finance.

The lender was swayed by several years of the husband working in the same sector with a stable job, and an ability to repay even if a reasonable pay cut were to occur.

Middle-aged couple

A couple in their 50s in the midlands had owned their detached home for 15 years and had built up decent equity in their country bungalow. A fixed-rate mortgage with Permanent TSB was coming to an end. Both are full-time employed for six years in a solid sector. They have savings and no other loans.

PTSB wrote to them with options that included a 5.15 per cent standard variable rate mortgage or an 8 per cent five-year fixed rate on their €80,000 mortgage.

KBC offered them a better rate at about 4.5 per cent, based on assessing both incomes.

The well-off trader-uppers

A couple wanted to trade up while keeping their existing property until the market improves. They had a 30 per cent deposit to put in, but didn't need to use it all. They were lucky enough to have lots of repayment capacity. This is classic KBC territory, and the bank approved a mortgage at 20 per cent deposit to loan value for a large €500,000 detached home.