| 2.8°C Dublin

Mortgage scheme gives just 13 loans in two years

A GOVERNMENT mortgage scheme to provide funding for first-time buyers turned down by the banks has issued just 13 home loans in two years.

The Home Choice scheme has been branded a failure after it emerged that nine out of 10 people who apply for a mortgage from it are turned away.

A spokesman for the Housing and Sustainable Communities Agency confirmed that just 13 out of 140 applications have been accepted in the past two years.

Around €2.5m in mortgages have been issued despite a €500m fund being put in place for the project.

But the spokesman insisted that the situation seemed worse than it was because many of those who applied for a mortgage did not meet the lending criteria.

The scheme was put in place in 2008 by the last government to provide a home loan for those who have been turned down by mainstream lenders.

Now, mortgage experts have called for a massive overhaul of Home Choice, which they said could play a vital role in helping potential buyers at a time when banks were reluctant to lend.

Karl Deeter of Irish Mortgage Brokers said: "It is not fit for purpose. It is a failure."

The housing agency said it had no plans to change its strict criteria.

To get a Home Choice loan you have to have had two mortgage refusals from mainstream lenders. A single person must be earning more than €35,000, with a joint income of at least €45,000 for a couple.

The most that can be borrowed is €285,000.

Michael Dowling of the Independent Mortgage Advisers Federation said the scheme was too cumbersome, with a number of state agencies involved in the issuing of a mortgage.

"It is a good idea but it is in the wrong hands. The criteria are too strict and there are too many different bodies involved," Mr Dowling said.

The fact an applicant has to be refused by two banks meant that many consumers saw the scheme as being like a subprime loan, he added.

Home Choice has been dogged with controversy.

More than 200 people submitted complaints to the EU Competition Directorate over the housing support scheme.

They claimed the Home Choice Loans scheme breaches state aid rules as it is effectively a bailout for builders.

The lack of lending is one of the main reasons the property market continues to crash, economists have said.

Irish Independent