One in three brokers warn Covid is putting buyer deposits at risk

Pandemic means house sales could fall through after contracts are signed

A THIRD of Irish mortgage brokers are aware of cases where mortgage applicants who have signed contracts to buy a new home are at risk of losing their deposit for reasons linked to Covid-19, according to new research.

A survey by Brokers Ireland found that of those who were aware of this possibility, more than 40pc of brokers believed this was extremely common or fairly common.

The survey found the vast majority of brokers have seen a fall off in mortgage applications, which was largely driven by would-be home buyers taking a cautious approach.

However, brokers indicated that some lenders are adopting ‘extreme risk-averse’ positions, even though many applicants have excellent prospects of repaying their mortgages.

“Lenders are cautious of income coming from specific employment sectors including tourism, travel, retail and self-employment,” said Rachel McGovern, director of financial services at Brokers Ireland.

“But brokers also agree that temporary restrictions are prudent where applicants may no longer have a job to support mortgage repayments,” she added.

Across the research, which surveyed 72 brokers, respondents were aware of a changed position on mortgages for all lenders.

All banks — including Bank of Ireland, AIB’s Haven, Permanent TSB and KBC — were seen as imposing additional restrictions.

Brokers claimed that all banks were in certain cases withdrawing prior existing approvals and imposing stricter drawdown conditions.

With regard to those at risk of losing their deposit, McGovern said: “What they (respondents) said was there were some clients that were due to lose their deposits, but they were still communicating and negotiating with developers or sellers.

“Only 7pc said the situation was extremely common,” she added.

In some cases builders are holding the property with the hope the buyer will be in a position to close the sale in the future, she said.

All banks were seen as taking longer to process applications.

When asked about the rationale for a fall off in applications, the most common reason given was temporary job losses, followed by temporary income reduction, and prospective buyers holding off hoping to buy later for a lower price.

A small proportion said it was due to banks imposing new restrictions.