Lenders should take note of rental history
AN attempt is being made in the UK to allow people’s rental credit history to be taken into account in mortgage applications. A similar approach in Ireland would certainly reinforce a person’s application and show that they are more than capable of honouring their mortgage commitments.
The fact is that one of the main things preventing young couples from taking out mortgages for so many years is that their income is being swallowed up by rent and therefore it takes them forever to save up the sizable deposit required. Their rental history, over many months and years is the best recommendation a bank could want.
It shows that no matter what other bills, pressures and financial ups and downs a person encounters, they still make their rent. It reflects maturity and experience of the real world, where if you don’t pay your rent or mortgage - you lose your home - and renters should be given credit for this. Having the many thousands of Euro spent on rent not even register on a mortgage application must be so frustrating for applicants.
Much like the thousand Euro or more rent that is paid out monthly is factored in as an outgoing rather than income that will be accessible as a mortgage payment once the applicant is actually in a position to buy a home.
Nowadays, it is such a slog, such a long term commitment and such a massive achievement in many cases to be approved for a mortgage and if anyone knows the reality of making a monthly payment is someone who has been renting and in turn paying a stranger’s mortgage.
While it is no bad thing that criteria has been tightened up and banks are considering only realistic figures for applicants, it must be infuriating for those who want to own their own home to have to jump through hoops to prove them can afford a monthly mortgage which is in fact a smaller amount than their rent.
While we might just be getting a handle on more responsible mortgage lending, the rental sector now has a lot to answer for in terms of the pressure it is putting on those who as Leo Varadkar puts it ‘get up in the morning’.
Allowing a person’s rental history to be considered in terms of a mortgage application would be helpful not for them to access a larger sum but rather to allow them to show their commitment and why they are entitled to the trust of their lender.