The revelation earlier this week that just two banks are now lending to first time buyers would’ve come as little surprise to many looking to get on the property ladder.
The banks have stated for some time that they are giving out loans but all the evidence would appear to state the contrary.
Yes, 2012 has witnessed a bit of a boost for the property market in the first two months of the year but with some estate agents reporting that cash buyers are now accounting for over 30% of their business, many who don’t have the luxury of cash reserves are being prevented from buying.
A report earlier this week revealed that only two banks – AIB and Bank of Ireland - are now willing to lend to first-time buyers. The news followed KBC’s decision to effectively pull the shutters down on mortgage lending to new buyers by insisting they have at least 20% of a deposit. To put that into context, it would mean that a first time buyer who have to put €40,000 of their own money towards the price of a €200,000 house.
Other banks are being just as tight with the likes of Permanent TSB, Ulster Bank, National Irish Bank and EBS reported to be extremely reluctant to lend to young borrowers.
No one is expecting banks to be as reckless with money as they were during the boom years but their hesitancy is severely hindering the market and, in turn, local economies as those who buy homes will in turn be looking to buy the likes of furniture, carpets, TVs and other household items.
This week’s MyHome.ie survey revealed that three out of four first time buyers believe they have enough money to pay for a deposit on a home but that money is little good to them if they cannot get the remainder of the finance from the banks.
These are the same banks who have been bailed out by the Irish taxpayer and who have been given funds in recent times by the European Central Bank in order to get the economy moving again.
Ask any bank official on the record whether his or her institution is lending or not and they’ll tell you “of course” but whether that be true or not, the vast majority of people don’t believe it.
Our survey – conducted before this week’s revelations - showed that 65% of homeowners do not believe financial institutions are lending, with 43% of them insisting they were over-regulated or over-cautious. Optimism was slightly up amongst first-time buyers, with just 52% believing that financial institutions were not lending but that’s still well off what it should be.
It’s not just homeowners or potential homeowners who are complaining either, with Irish Hotels’ Federation president Michael Vaughan also highlighting the lack of available credit as a major obstacle for the hotel industry to overcome.
The reality is that unless access to finance is freed up then transactions will remain low.
Considering the incentives that Minister for Finance Michael Noonan introduced in last December’s Budget to encourage first-time buyers to buy in 2012, surely the time has come for the government to intervene and force the banks into lending more.
We’re a quarter of the way through the year now and the promised funds haven’t arrived. The banks being cautious is understandable but the harsh lessons of the past shouldn’t prevent a new and younger generation from being able to purchase their own home.
Hopefully there is light at the end of the tunnel though with some hope taken from the fact that an Oireachtas Committee recommended this week that banks should not have the final say on who gets a mortgage write-down. They suggested an appeals mechanism would be put in place.
That, at least, would ensure fair play, which many feel they aren’t getting at present.
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