The chief executive of Banking Payments Federation Ireland has said it is not unreasonable for banks to look closely at applicants coming forward for mortgages and loans. 

Brian Hayes' comments follow news of AIB's stricter lending guidelines as a result of the impact of Covid-19. 

Mr Hayes said that lenders have a responsibility to borrowers. 

He said there is not a blanket ban across the industry and the different lenders make individual decisions.  

Brian Hayes said, in the interests of borrowers, banks have to look beyond the short term immediate situation of Covid-19 and ask if the applicant will be able to repay a long term loan.

4,000 mortgages have been drawn down in the last two months, he noted. 

Mr Hayes also said that banks have made it clear that there must be a regard for a change in circumstances between mortgage approval and drawdown. 

It is also the clear view of the Governor of the Central Bank of Ireland that it is in the interest of the borrower that there must be a full assessment before the mortgage is drawn down.

Mr Hayes said his advice to mortgage applicants is to shop around. 

The Central Bank said yesterday that the decision to grant or refuse an individual application for mortgage credit is a commercial decision to be made by the regulated entity. 


 

"A loan offer may contain a condition that the lender can withdraw or vary the offer if in the lender's opinion there is any material change in circumstances prior to drawdown. In such cases, the decision to withdraw or vary the offer is a commercial decision for the lender," the Central Bank said.

Earlier this month, Central Bank Governor Gabriel Makhlouf said that banks had a role to play in supporting customers during the Covid-19 crisis but that they must do so "in a sustainable way". 

He also said he expected that banks would be making losses in the coming months and relying on built-up reserves.  

He described the financial system as "resilient" but added that that resilience was "not infinite".

AIB said yesterday that at a time of unprecedented economic instability triggered by the Covid-19 pandemic, "it considers it prudent to review its mortgage lending policies".

"It is imperative that the mistakes of the past are not repeated, that customers are not exposed to unnecessary risk and that their loans are sustainable," the bank added.

Bank of Ireland said today that it continues to process mortgage applications for customers who are on the Covid-19 benefit schemes, provided affordability is not an issue. 

Where income has changed, the bank said it is liaising with customers to understand their updated circumstances and assess if these are expected to change again in the future.  

This process has always been followed where income changes for an applicant, as it would not be responsible to provide somebody with a mortgage at a level that they will struggle to afford, Bank of Ireland added.

Sinn Fein's Housing spokesman Eoin O'Broin has called for several banks to end a blanket ban they have imposed on mortage applicants who are availing of the Wage Subsidy Scheme. 

Eoin O'Broin said that banks should take a more nuanced approach to this and to do individual assessments and deal with each case on its merits.

He said no one is asking the banks to break legislation regulations or to lend recklessly.

He said he has been contacted by constituents who are still in full time employment, with many receiving the same wage as before as alongside the Wage Subsidy Scheme, their wages are being topped up by their employer. This indicated that their employment is secure, he said.

Mr O'Broin said in some cases where people have had mortgage pre-approval, that pre-approval has been withdrawn. 

He said in two or three cases, people signed contracts and either the contract has been put on pause, or people have been told they can not proceed with the purchase until they had two Post Covid wage slips. 

He said in these cases, people have lost their homes.

People "are already deeply frustrated at the failure of banks to play their part," he added. 

He also accused the banks of looking after themselves and not looking after the needs of their customers.