Mortgage seekers face tighter criteria over Covid-19 wage subsidy

Several Irish lenders have introduced tighter checks and stricter conditions on mortgages for those in receipt of Covid-era wage subsidies.

In some instances, borrowers will have to produce evidence from their employers that their wage is sustainable after subsidies elapse. In couples where one person is on a wage subsidy, some lenders will insist the second partner is able to cover the entirety of the mortgage with their wage.

It comes after The Irish Times revealed on Monday that AIB had put in place a de facto block on mortgage lending to those in receipt of the temporary wage subsidy scheme (TWSS).

Permanent TSB said customers on the wage subsidy scheme can draw down their loans "subject to their employers providing assurance on the sustainability of their income when the TWSS comes to an end".

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Finance Ireland, a non-bank lender which is more than 30 per cent owned by the State, said "where an application has been materially affected by a Covid-related subsidy, loans cannot be drawn down until a return to regular income can be evidenced".

‘Confirmation of income’

A spokeswoman for Ulster Bank said it was accepting new mortgage applications where one or both applicants were on the wage subsidy scheme. However, it said it would require "confirmation of income and employment" before advancing to a loan offer. It is understood that Ulster Bank will insist that where one applicant in a couple is on a wage subsidy, the second applicant who is not must be able to cover the entire loan by themselves.

Bank of Ireland said it was still lending to those in receipt of the subsidy. The bank said that while a number of applications had been "deferred", "mortgages are drawing down daily for customers in receipt of the Government subsidy where overall sustainable affordability has been satisfied".

“Where income has changed, we are liaising with customers to understand their updated circumstances and assess if these are expected to change again in the future.”

AIB’s policy drew criticism from both the Taoiseach and the Minister for Public Expenditure and Reform on Monday.

Michael McGrath said he was "not happy" about the development, and had previously "conveyed his opposition and concerns" to banking groups and the governor of the Central Bank.

Asked about Mr McGrath’s comments, Micheál Martin said he “would agree with the Minister and I think that is something we will examine and look at . . . I wouldn’t be entirely happy with that approach,” he said.

AIB has said its policies are kept under review, and that it is “imperative the mistakes of the past are not repeated”.

Prudent lending

Brian Hayes, the former Fine Gael MEP, TD and junior minister, who is now chief executive of the Banking and Payments Federation of Ireland, said lenders had a "legal and regulatory requirement" to lend prudently. "[Banks] have a fundamental responsibility to lend in this environment, but they cannot do reckless lending," he said.

Pearse Doherty, the Sinn Féin finance spokesman, said the AIB policy "will affect countless customers who have not lost their jobs, had their pay cut or hours reduced. This de-facto ban pays no heed to this reality."

Labour TD Ged Nash said he had made representations on behalf of several constituents who had paid deposits “only to have been threatened with withdrawal of their original mortgage offer on the basis they are being paid, for now, through the wage subsidy scheme”.

A spokeswoman for the Central Bank said it expected all regulated firms to take "a consumer-focused approach and act in their customers' best interests at all times", but that the decision to grant or refuse applications is a commercial decision for banks alone. The Central Bank pointed to European Union regulations which provide that lenders have to make a thorough assessment of consumer creditworthiness before approving a loan. Earlier this month, Central Bank governor Gabriel Makhlouf said the banking system had a role to play during the Covid-19 crisis and "it must do so in a sustainable way".