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A NUMBER OF mortgage applicants who received approval prior to the Covid-19 crisis in Ireland are now faced with uncertainty on whether they can draw down their mortgages, with some having their approval pulled because they’re in receipt of the government’s temporary wage subsidy scheme.
In many cases, the income of those in receipt of the subsidy hasn’t declined and their pay slips show they’re earning at the same level they were pre-Covid.
Last week, TheJournal.ie reported that a married couple who were about to move into a home prior to the pandemic restrictions in March were told by their bank that because one of them is on the wage subsidy scheme, they wouldn’t be able to draw down their mortgage.
This is despite already signing contracts and paying their deposit on a new build home outside Dublin.
Since then, TheJournal.ie has spoken to a number of other mortgage applicants now facing an extra bit of uncertainty as they too are on the wage subsidy scheme. They are now either unsure if they can draw down their mortgage or have been told by their bank that they cannot.
Complaints
New figures show that almost 270 complaints about mortgages have been made to the Financial Services and Pensions Ombudsman since the beginning of March, and the matter has been raised on a number of different occasions through parliamentary questions in the Dáil.
We also asked the five main banks – AIB, Bank of Ireland, Ulster Bank, KBC and Permanent TSB – for their response to why customers who were previously approved for mortgages were now being told that approval was being pulled.
Each one said they had to be prudent when providing mortgages and offer drawdown based on the last available financial information of applicants.
In the case of Permanent TSB, it said that when employers provide assurance on the sustainability of an applicant’s income when the wage subsidy comes to an end, it would work to facilitate those customers.
Uncertainty
Under the temporary wage subsidy scheme, the government pays a percentage of a worker’s wage in companies and industries that have experienced losses of revenue and earnings during the pandemic.
According to the most recent figures from the Department of Employment Affairs and Social Protection, there are 59,000 employers registered for the scheme.
A further 520,000 workers have received at least one payment on the scheme. For many employees, they are not suffering a loss in income despite the problems facing their employers due to Covid-19.
Facing calls from businesses under pressure given the loss of revenue during lockdown, the government has extended the wage subsidy scheme until the end of August.
Employers groups have called for further extensions to the scheme, with the possibility of tens of thousands of employees having their wages subsidised into the near future.
That would leave mortgage applicants on the scheme in a difficult situation going forward, if they are left uncertain over whether or not they will be able to buy a home.
In several cases, customers at different banks said they’d been told that the bank required wage slips to show whether or not they were in receipt of the wage subsidy scheme before they could proceed.
If they didn’t, or showed wage slips to show they were on the wage subsidy scheme, the bank was unwilling to proceed with the mortgage at this time, despite already granting approval.
In one situation, Margaret* said she and her husband are finding it difficult to find any clarity from their bank when it comes to the subsidy.
She is self-employed and her husband is in receipt of the wage subsidy scheme.
They were in the latter stages of being about to purchase their home – including receiving approval and putting a deposit down – when Covid happened. Now the timeline of that process has been made uncertain, they don’t know when they actually progress to the stage of drawing down their mortgage.
“We have no way of knowing and until then we won’t know what will happen when we go to drawdown,” she said. “The stress is real, and growing.
The money going into our accounts every month hasn’t changed. We’ve been paying rent for years at a similar level to what the mortgage will be. If the banks have a blanket policy of refusing to allow drawdown if the subsidy scheme appears on their payslip, we won’t be able to complete the purchase of the house and will be left paying the same amount every month in rent. It’s a crazy situation.
Margaret said what would help is action from the government directly on the issue and clarity from banks.
“Our biggest worry is that we’re going to miss out on buying the house that we spent so long looking for and saving for while paying rent,” she added.
“There have been very few suitable houses on the market in our area in the past year and that situation isn’t going to change any time soon.”
Formal complaints
In figures released to TheJournal.ie, the Financial Services and Pensions Ombudsman (FSPO) said that from 1 March to the end of May it received 269 complaints concerning a mortgage product.
It indicated that in the majority of the complaints it receives the complaint must first be made to the financial service provider to allow it to deal with the issue first. If a complaint is not resolved by the financial services provider, a complaint can then be made to the FSPO.
When it came specifically to Covid-related complaints, the FSPO said it had received 100 complaints to the end of March. Of these complaints, 70 related to insurance products with 23 about the banking sector.
The FSPO indicated that within those 23 complaints in the banking sector, there would have been mortgage-specific complaints.
Bank statements
In response to this matter being raised via parliamentary questions, Minister for Finance Paschal Donohoe said loan offers may contain a condition that the lender can withdraw or vary the offer if, in the lender’s opinion, there is a material change in an applicant’s circumstances prior to withdrawal.
“In such cases, the decision to withdraw or vary the offer is a commercial decision for the lender,” he said.
TheJournal.ie asked the main banks for comments on this issue of applicants on the wage subsidy scheme.
A spokesperson for AIB said: “AIB is engaging with all customers looking to drawdown a mortgage to ensure their circumstances and ability to pay have not been materially impacted by the uncertain environment caused by Covid-19, and the mortgage is still appropriate for them.
The bank will consider applications from customers whose employer avails of the wage subsidy scheme. Our customers are our primary concern in this environment and we will remain prudent in our lending to protect them and the bank.
A Bank of Ireland spokesperson said: “We understand that income levels for some mortgage applicants have been impacted and we are continuously looking for ways to support customers during the current national health emergency.
“Where income has changed, we are liaising with customers to understand their updated circumstances and if these are expected to change again in the future.
It wouldn’t be a responsible move to provide somebody with a mortgage at a level that they will struggle to afford, therefore where affordability changes we have a duty to discuss this with customers.
“Customers who wish to pause their applications as a result of temporary income reductions are being supported and can continue with their existing approvals once sustainable income is restored.”
A spokesperson for Permanent TSB said: “We have a duty of care to our customers to ensure that any lending is affordable for them. In accordance with consumer protection requirements, we are facilitating mortgage-approved customers on the TWSS in drawing down their loans subject to their employers providing assurance on the sustainability of their income when the TWSS comes to an end.
“We are doing everything we can to support our customers at this difficult time and are working with them on a case by case basis to assess their individual situations.”
Ulster Bank’s spokesperson said: “All mortgage applications are treated on a case by case basis, there is no automatic approval or refusal.
Like all banks, and in line with our responsibilities as a lender to ensure our customers do not take on unaffordable debt, we require confirmation that customer’s income and employment status remains unchanged as a result of Covid-19. Loan offer customers will be required to confirm if they have been impacted by Covid-19 as well as providing an up to date bank statement prior to drawdown.
A spokesperson for KBC said: “Each application is assessed on a case by case basis. All approvals in principle are granted based on the information provided by the customer at the initial application stage.
“A full assessment of the customer’s financial circumstances is carried out prior to full approval on all applications where approval has been granted in principle to ensure that the customer is still in a position to afford the mortgage they have requested.
“KBC is not employing a policy of withdrawing AIPs or loan offers however in line with prudent lending practices, updated financial information is being sought from customers prior to drawdown, KBC do not want any customer to enter into a financial commitment that they cannot afford.”
*Names have been anonymised at the individual’s request
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It’s a pity but it’s a sensible approach by the banks. These mortgages just became more risky, I don’t fancy a second bailout because the banks are handing out money like nothing has changed. The risk profile of the borrower has to be considered & if there is any concern that their employment is in jeopardy I think it’s a reasonable approach.
@Lav: the bailout wasn’t because the banks gave out mortgages for home owners, it was because they gave out huge loans to developers and property developers that failed. The banks also traded on highly risky financial assets that went down the tubes.
There’s a good bet house prices will drop significantly over the next 6-12 months.
They are far better off.
@James Brady: Highly unlikely to drop much and almost certainty not significantly. Flip side of the coin is the chronic shortage of quality housing supply on the market and the demand is only continuing to build as buyer and seller understandably wait for uncertainty to clear.
There’s also literally 100s of thousands of people working from home financially unimpacted by the last 3 months as well with thousands going back to work every week so you can easily speculate the other way also
So many vested interests in this country in properties and keeping prices high I just don’t see it dropping near as much if at all. Srill huge demand for quality out there.
@Daniel: I 100% agree it will be a soft slow landing
@Daniel: there is no shortage of investment funds and Ireland, despite the whining of local landlords, has one of the best returns on rental property in the world. Investment funds will buy everything up and our children will be reduced to cash cows for landlords.
@James Brady: You’re Daft!
@Daniel: Oo my way home for the past 10 months I am passing by two brand new housing estate with quality houses and I guess more than 75% are still empty. Looks to like no lack of quality houses is rather lack of cheap houses.
Naturally this was going to happen. Banks hate uncertainty and until the ship is steadied the banks will continue to be prudent.
@family guy: How many public sector workers are facing this problem?
@Virus-free Turkey: guaranteed jobs and gold plated pensions and the state is nearly broke .probably will all get pay increases this year or next.
@family guy: Pity they weren’t so “prudent” in 2008.
Should be no stress as less mortgage approvals will ultimately reduce property prices.
@Daniel Kelly: wishful thinking but don’t see it happening like that. There are hundreds of thousands of people in this country who have been financially unaffected by the pandemic and who will continue to successfully get mortgage approval and drawdown. The issue of supply and demand is still there so there’s unlikely to be much of a reduction in property prices. People still need homes to live in, a large portion of people have worked all the way through the pandemic and continue to do so, there’s a shortage of supply of housing units so things won’t change very much.
@Emma McGuire: I disagree, property prices will CrAsH as the covid-19 pandemic will increase debt/taxes on society. Therefore, more taxes equals less disposable income and banks will only give mortgage approval based on affordability to repay. Hence, banks will give smaller loan’s as income reduces. In addition, unemployment is expected to increase which will result in further taxes on income etc.
Therefore, if the estate agents do not lower achievable property prices sales will slump. Thus, the government won’t receive stamp duty or any taxes on business interest’s (solicitor’s/estate agent’s/surveyor’s) involved in the day to day property sale transaction’s. Repeat and rinse, less income received by government results in more taxes yet again to fund the country. Wishful thinking on your part I’d say! Maybe you are a vested interest?
@Daniel Kelly: it would be great if prices came down but I think unfortunately it’s wishful thinking on your part. The only vested interest I have is that I’m trying to buy somewhere to love.
@owentighe: and live in lol :)
@owentighe: Supply and demand is not the only factor that decides property prices. National income is the ultimate deciding factor as a property can only sell for the maximum offered by the market.
My deepest sympathy is first with the families that have lost loved ones. RIP.
The other thing that’s so very sad is reading about small & local businesses that just about made it through the last recession are now being wiped out by this, even though the government said “ Were all in this together “ I remember P.D. Saying about the small business owners that “giving some of them a bailout would be throwing good money after bad” He should know i mean look at the cost of the NCH that might never actually happen!
@Colette Kearns: The country can’t throw the people’s tax at private businesses that are no longer viable, so Paschal Donohoe was spot on in what he said. Oh, I forgot, you support the other PD finance man of the magic money tree brigade!
On the article above, it makes sense that if a person’s employment is gone they can’t go ahead with a mortgage at the moment.
@Fionn Darland: but they can piss away extra billions on the children’s hospital to their buddy developers or an extra 2.5 billion on the broadband plan despite public offers to do a better job for cheaper? They must have a money tree of their own somewhere.
It’s very very sad position that these tax paying workers are in. For new builds their process could of been approved twice already before draw down.
@databackup: yes there should be public housing for this specific cohort. Originally public housing was only for workers.
What are you going to do with a home anyway? Die and let someone else sell it and have a holiday at your expense? Wake up to reality!
@Orpuk Jones: The flip side to this is mortgage repayments will reduce in real terms with inflation over the course of the mortgage, you will also own the asset by the time you retire in most cases. If you rent then you will have rents increasing over your lifetime and will need a large pension to pay the rent in your retirement and also the uncertainty of security of tenancy. So who’s living in reality?
@Orpuk Jones: mortgage payments are far cheaper than rent at the moment, plus you get an asset at the back end.
Asking for a month’s worth of non covid payslips when you return so people who’s house’s are ready waiting to drawn down have to wait a month and get 4 payslips they won’t accept a letter from employer , while I agree in some instances they are definitely not taken a case by case basis approach.
The real reason youth are protesting in record numbers:
https://youtu.be/e1YqsENguXk
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