DON'T BE surprised if Irish lenders introduce further disciplines in the mortgage market to bring the ground rules more into line with new regulations in the UK, writes JACK FAGAN

Though many Irish banks continue to give the impression that it is business as usual for first-time buyers, the reality is that the mortgage market is still only semi-functional because the same banks are finding it difficult and expensive to raise money on international markets and we suspect that they are largely dependent on deposits and savings to finance much of their mortgage lending.

With funds so tight since the beginning of the year, Irish lenders are naturally hand-picking the clients they want to do business with – generally those with good, safe jobs and a record of saving rather than a reputation for relying on daddy whenever a dig out is needed. Even those who tick all the boxes can only expect a 92 per cent loan-to-value (LTV) rate.

It’s worse for buy-to-let investors – even those with an impeccable record – who cannot hope to get anything better than a 75 per cent LTV for properties with a guaranteed rental income.

Lorraine Cullen of mortgage specialists MMPI in Donnybrook offers a more optimistic view of the market, pointing out that there are signs of a pick-up in the level of applications to lenders which could be an early indication of increased market activity to come. She says affordability is continuing to improve, both for first-time buyers and trader-uppers, and stresses the importance of making contact with an independent mortgage broker, like MMPI, to ensure people know what can be borrowed at the most competitive rate.

As part of a review of the mortgage market in Britain, home buyers will in future be forced to disclose how much they spend on alcohol, eating out and even summer holidays when they apply for a mortgage. The idea behind this is that the Financial Services Authority there wants to bring in “affordability tests” to strip back borrowers’ disposable income after bills and other debt commitments.

Lest we forget, even as Ireland slipped into the depths of the financial crisis, banks here were equally cavalier in lending money – not just to developers – but also to people wanting to buy over-priced homes and sometimes a third and fourth investment property. Most people who purchased three years are now in negative equity territory and, like many more, are worried about their jobs. Not only that, the investors have to contend with a 20 per cent cut in rents but, if they are lucky enough to have avoided a fixed rate mortgage, they are being partially compensated by the lowest repayments for over half a century.

As in Britain, Irish banks often gave 100 per cent mortgages until the market collapsed – something we are unlikely to see in the foreseeable future. There was sporadic criticism at the time about these mortgages but, to our eternal shame, there was no attempt by the financial hierarchy to impose discipline on such mortgage lending until the financial crisis brought us to our knees.

While much of the problem in the UK revolved around the availability of “self-certification” mortgages – they accounted for 45 per cent of the entire business in 2006-07 – at least Irish lenders generally insisted on proof of income. With a shortfall in the supply of credit likely over the next year or two, lenders here will be carrying out even more rigorous credit checks so that clients are not extended debt they cannot afford.

Bank rates will inevitably rise and, once they start to move, the increased margins needed to restore a viable level of liquidity in the banks will start to bite. Even at this stage, the banks have much in common with Ryanair’s notorious list of extras; they charge for cheques issued and cashed, credit transfers, laser withdrawals and there is the growing practice of a bounced cheque – discreetly referred to in other times as “refer to drawer”.

Whatever about the tighter restrictions on the way for those looking for mortgages, credit generally will be much more difficult to source. And since the problem was caused by a relatively small group of developers, it seems unfair that we all have to take the hit for them.