Banks defend reviews of home-buyers struggling in Covid crisis
banks’ policy of reviewing mortgage applicants in the wake of the Covid crisis has been defended by the Banking Federation.
Lenders have been heavily criticised for reassessing loans to would-be home-buyers, who are now on the wage subsidy scheme, because the Covid-19 pandemic has put their jobs on hold. And the head of the Banking and Payments Federation, Brian Hayes, stood by the actions.
The banks’ move was criticised by Micheál Martin, just days after he was made Taoiseach, while the new Minister for Public Expenditure and Reform Michael McGrath said he knew of applicants who had the brakes put on their mortgage draw-downs once the banks discovered they were in receipt of a wage subsidy. However, Mr Hayes, a former junior minister in Finance, said: ‘There’s no blanket ban across the industry, there’s no industry position on it. We have different lenders in the Irish market, they have individual credit decisions, they are each individual regulated lending entities and they are responsible for their own credit decisions, bank by bank.
‘The question is: is it surprising or unreasonable in a circumstance where these temporary Covid subsidies measures are in place that banks would look closely at applicants who are coming forward? By the very nature of something that is temporary, it’s not guaranteed for 20 years or ten years. The point is this, if you’re taking out a mortgage, it’s a pretty serious thing. It’s a loan not just for six months or 12 months, it’s a loan for 20, 25 or 30 years. In that circumstance, lenders will look closely at borrowers’ ability to pay, where stands someone’s employment prospects? Are they in a very vulnerable sector right now? It is not unreasonable that banks will be looking closely at decisions. The other point is it’s the law.’
David Hall, of the Irish Mortgage Holders’ Organisation, said: ‘We have to learn from previous mistakes and while it’s not nice to have a mortgage application delayed, being in mortgage distress is worse.’
Taoiseach Mr Martin said: ‘I think, as we said, we will be evaluating the operation of the Wage Subsidy Scheme more generally because it is critical to underpinning a lot of companies, a lot of businesses.’
Labour Party employment and social protection spokesman
Ged Nash described the move as a ‘disaster’ for workers hoping to buy their own homes.
‘I fear this is harbinger of things to come because we are by no means out of the woods regardTHE ing the coronavirus and the economic challenge that the pandemic has caused,’ he said.
The rules on mortgage lending were tightened up in 2012 when the law was changed around lenders’ responsibility to borrowers.
Mr Hayes said: ‘Borrowers have to show an ability to repay and that is the law. Whatever about politicians saying one things or banks saying another.
‘We have an independent regulator, the Central Bank of Ireland, they have made it perfectly clear that banks are expected to look beyond the immediate situation of Covid, and look beyond the short term.’
Look beyond the short term