Mortgage lenders to demand 20pc cash deposits
THE housing market suffered a new blow after it emerged last night that house buyers will have to come up with at least 20pc of the value of properties they plan to buy.
The move will mean buyers will have to produce deposits of €54,000, based on the average price of a house at the moment.
One of the largest lenders in the State, KBC Homeloans said it would now only provide mortgages for 80pc of the value of homes.
Mortgage market experts said other lenders were now likely to follow KBC.
One mortgage commentator said KBC (formerly called IIB Homeloans) was the first to state clearly that it would only provide mortgages for 80pc of the value of homes, but some other lenders are already insisting on deposits of at least 20pc of the value of the property before they will approve a loan.
Mortgage providers are demanding bigger deposits because they fear negative equity will wipe out the value of their loan books.
Job instability and the general state of the economy were other factors why Belgian-owned KBC was seeking higher deposits, a spokesman for the lender said.
Up to now KBC had been offering loans worth 92pc of the value of the homes it was financing.
It had been taking out insurance against losses on portions of mortgage where the value was more than 80pc of the value of the home, to protect itself against negative equity.
But upheavals in the insurance markets have made this insurance, known as a mortgage indemnity guarantee, extremely expensive.
The KBC spokesman denied the lender had been forced to demand higher deposits from home buyers because its indemnity insurance had become too expensive.
"The indemnity is a factor in the increase in loan to values but not the only factor," the spokesman said.
The lender said it would make an exception for public servants and loan up to 85pc of the value of homes to them.
Mortgage broker Karl Deeter of Irish Mortgage Brokers said: "This is something which is likely to spread to other lenders and will have a massive impact on the mortgage market."
Up to now buyers need to have a deposit of between 8pc and 10pc of the value of their home before they can secure a mortgage.