Buyers are holding out for further cuts yet developers in many cases are selling new homes at or below cost, so something's got to give, writes JACK FAGAN

THE DAYS OF the ready-made property mortgages are well and truly over. As the credit squeeze continues to cause turmoil in the Irish economy and elsewhere, there is a growing realisation that banking and its approach to property funding will never be the same again.

As everyone knows, the easy availability of bank debt over the past decade triggered the property bubble which brought the country to its knees when it burst. It was not supposed to end like this but, when you have a flawed banking system and a less than vigilant financial hierarchy, these things will happen.

With bank credit for acquisitions extremely difficult to source at the moment, the commercial property market is likely to remain in the doldrums until Nama gets moving on the €90 billion in toxic loans.

Happily the first-time buyers’ market is faring much better with several institutions – including AIB, Bank of Ireland, ICS and EBS – all offering loans of up to 92 per cent on the value of properties. This means that buyers only have to come up with a deposit of 8 per cent – a modest enough down payment considering the scarcity of bank credit.

Irish Mortgage Corporation (IMC) has given examples of recent mortgage approvals to illustrate how the market is moving again.

It cites the case of a couple, both lecturers and each earning €80,000, who were able to raise €550,000 for their first home; another couple, a manager and a nurse on a combined income of €124,000 got a mortgage of €506,000; while a Garda on a salary of €48,000 got approval to buy a home for €253,000. Once past that hurdle, interest rates for the first year are modest enough, ranging between 2.35 and 2.5 per cent.

By all accounts there are any number of applicants for first-time mortgages and, though IMC estimates that about 66 per cent of them are being approved right away, it has not translated into immediate sales of new and second-hand homes.

Viewings have been surprisingly strong but, according to some agents, many of those with loan approval have been holding back, watching and waiting in the expectation that prices will fall further. This may well happen in the second-hand market but, with the selling prices of new homes now beginning to fall short of the costs involved, developers will have little or no room to manoeuvre further.

The rare opportunity to buy while prices are on the floor is obviously grabbing the attention of ever more younger people but, with no let-up in sight to the downturn, many of these potential buyers have already lost their places in the mortgage queue either because of wage or bonus cuts or, worse still, job losses. Banks do not do business with applicants who are either out of work or on probation. These strictures mean that those ready to buy are older and better paid and probably have been in their jobs for longer. They are also buying better properties than they could have afforded in the past, availing of the same borrowing multiple rules of four and five times their incomes.

For others, the tighter criteria in the mortgage market has meant that the banks are taking a closer interest in an applicant’s credit history. They invariably check to see if the deposit for the property has come from personal savings or is a present from parents. Applicants must show a pattern of savings if they are to have a chance of getting bank funding, says Frank Conway of IMC. They must demonstrate that they have a good credit history with no negative comments on file. Any mention of a revoked credit card (perish the thought) or difficulties repaying a student loan can lead to a rejection.

While court-appointed receivers are expected to take over the disposal of a small number of developments in the coming weeks, buyers in the market for a new home would be well advised to watch out also for a number of schemes in the Dublin suburbs which are to be relaunched this autumn at substantially reduced prices. Developers know that they must cut prices to the bone if they’re to sell completed homes before the winter sets in.