Lenders queue up to offer 100 per cent first-time buyers' mortgages

First-time buyers who can't get a deposit together now have a choice of five lenders who are offering 100 per cent mortgages.

Permanent TSB, Ulster Bank, Bank of Ireland and its subsidiary ICS Building Society have all followed First Active's move to waive the traditional requirement for a deposit equivalent to 8 or 10 per cent of the purchase price of the property.

At most of these lenders, first-time buyers will still need money up front to pay for booking deposits, which they can then recover later when they draw down the mortgage.

But Bank of Ireland has gone one step further, offering a personal loan to cover the contract deposit. The personal loan is then redeemed when the mortgage cheque is issued, with the interest payments on the loan - charged at a rate of 6 per cent - deferred until this time.

Otherwise the main difference between the four products is the length of the term over which it is available.

First Active and Ulster Bank, which normally offer repayment terms of up to 40 years, have restricted the terms on their 100 per cent mortgages to 30 years, whereas Permanent TSB and Bank of Ireland are offering full funding loans over 35 years.

This suggests that people applying to Permanent TSB and Bank of Ireland will be able to borrow more than those who apply to First Active and Ulster Bank, as they will be able to spread the repayments over a longer term.

However, other factors - such as whether the application is a single or joint one, whether the applicant's income is permanent or fluctuating and whether they have a savings history - will come into play and will be treated differently by the lenders.

Although much will depend on applicants' circumstances, Permanent TSB, Ulster Bank and First Active all have a reputation for being aggressive lenders, willing to advance more money to first-time buyers than other lenders.

As lending criteria can be a complicated science, it will save would-be property buyers' time if they approach a broker who will make several simultaneous applications for mortgage approval in principle to the lenders.

For example, Permanent TSB lends on the basis that the repayments on the mortgage must not exceed 35 per cent of the applicant's net disposable income, while First Active works on a 40 per cent rule.

But this doesn't necessarily mean that a borrower will squeeze more out of First Active than they will out of Permanent TSB, as First Active stress tests its loans to a more stringent degree than its rival.

According to mortgage broker Liam Ferguson of Ferguson & Associates and www.yourfirstcastle.com, First Active requires borrowers to be able to repay the loan without exceeding 40 per cent of their net disposable income at an interest rate of 2 per cent above its standard variable rate, while Permanent TSB stress tests its loans at its normal variable rate. "The end result is often not that much different," says Ferguson.

Not everybody will qualify for the new breed of 100 per cent mortgages.

Permanent TSB, Ulster Bank and First Active require applicants to have a three-year employment record, while Bank of Ireland has stipulated that single buyers must have annual income of at least €35,000 and joint buyers a combined income of at least €60,000.

The properties purchased must have a minimum of two bedrooms and all parties to the loan must be first-time buyers.