Revenue rules make access to credit harder

It seems that the Central Bank is worried. It is concerned that we are borrowing too much and not thinking about the future consequences of our action.

It is anxious that we are not paying enough attention to the reality that interest rates are at an all-time low and must start to climb again. This will make our mortgages and other debts more expensive and, in extreme circumstances, could tip households into financial difficulties.

Behind this is the relatively easy access we now have to credit. Mortgages are easier to come by than ever before, as are credit cards and personal loans. Maybe we have reached a stage where money is just too freely available?

Anecdotal evidence of the mortgage market points to both positive and negative answers to this question - some think the money is being "thrown" at them, while others are having a hard time persuading their bank manager that they qualify for any borrowings at all.

People in the latter category will tend to be single, on modest incomes and have shaky job security. It is a common situation, even in this full-employment economy.

These individuals, who have their heart set on owning homes of their own, will often only qualify for mortgages that fall beneath the amount they need to fund any purchase. This leaves them in a difficult situation - either wait and try to fulfil their dream later when their wages may have risen or seek assistance from a third party.

The easiest way to do this will be to get a donation from a generous benefactor who does not particularly want to take any ownership in the property.

This will usually involve the parent (or other benefactor) confirming in a letter that they will not use their gift as the basis of a partial claim on the property in the future.

This letter will be filed by the buyer's solicitor and the purchase will then proceed without further involvement from the third party.

It is a nice way out if you can find it, but of course many first-timers with less prosperous parents or other relatives will simply not be in a position to do so.

When the "gift" route is closed off, the next most obvious option to consider will be the guarantee.

This involves asking a parent or other relative to act as guarantor on a first-timer's loan. In simple terms, it means that the third party will promise to meet the mortgage repayments in the event of the actual homeowner having problems in doing so.

Until recently, this often involved the guarantor's name being included on mortgage documents, with the actual owner's name put on the deeds of the property. This was the case where the borrower fell well short of their required mortgage amount on their own account.

It used to be the case that first-time buyers, whose guarantors put their names on the mortgage, could qualify for reduced stamp duty rates under their first-timer status. The Revenue Commissioners now say this is unacceptable however, with the result that lenders are changing their practices.

Liam Ferguson of mortgage broker Ferguson and Associates says lenders are now back in a situation where guarantors, while still allowed, are no longer being named on mortgage documents.

This implies a little bit less security for the lender but, happily, should make very little difference to the buyer.