Saturday 17 November 2018

Ulster Bank is bucking trend on exemptions for new buyers

Photo: PA
Photo: PA
Charlie Weston

Charlie Weston

Ulster Bank is continuing to accept mortgage applications from new buyers who need an exemption from strict lending limits.

Most banks are struggling to manage their lending quotas because of the time lag between home buyers getting approval and drawdown.

But Ulster Bank has told brokers that it can still accept applications from first-time buyers who want an exemption to the lending limits.

The Central Bank limits restrict banks to lend 3.5 times the income of borrowers.

The surge in house prices in the last few years has meant many buyers are now ruled out from buying because of these loan-to-income limits.

However, banks have leeway to exempt up to 20pc of mortgages being issued to first-time buyers, allowing them to borrow more than 3.5 times their income.

These exemptions are typically only available to borrowers with good earning potential, such as newly qualified doctors or those expected to gain promotion quickly.

But most banks had already exceeded their limits in the first half of the year.

A recent Central Bank report pointed out that banks in general had already issued 23pc of mortgages with exemptions, which means they have to issue fewer in the second half of the year.

The 20pc exemption is calculated on a year-to-year basis.

Some banks are finding it so difficult to keep within their exemption limits in a calendar year that they have been offering home buyers an incentive of up to €3,000 to get them to delay.

Ulster Bank is bucking the trend, however, and found itself with lending capacity for customers seeking Central Bank exceptions for this year.

"As you are aware Ulster Bank has maintained a consistent, 'always-open' approach to managing our Central Bank exceptions in 2018 and we remain open to these customers, including first-time buyers seeking an exception to the loan-to-income restrictions," a statement from the bank said.

This is in stark contrast to AIB, which has called on the Central Bank to change the rules to make it easier for lenders to manage their quotas for borderline customers.

Mortgage broker Michael Dowling said the Ulster Bank situation was unusual. "Most banks had exceeded the loan-to-value exemption limits for first-time buyers in the first half of the year," he said.

Another broker, Karl Deeter, said the process "is difficult for banks to manage, which hurts first-time buyers".

Irish Independent

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