Applicants for affordable housing schemes can now borrow from financial institutions as well as their local authority, following the launch of a new mortgage product by Bank of Ireland, writes Laura Slattery.

The bank is to offer qualifying affordable housing applicants loans of up to 97 per cent of the purchase price of their property from the start of the new year.

Normally, Irish lenders advance a maximum of 92 per cent of the purchase price, meaning people must save a deposit equivalent to 8 per cent of the price of a property.

Under Bank of Ireland's Breakthrough mortgage product, first-time buyers will only have to provide a 3 per cent deposit.

Up to now, mortgage finance for affordable housing has only been available from local authorities through the Housing Finance Agency up to a maximum loan of €165,000. This source of funding will continue. However, those who currently hold a local authority loan can convert to a Bank of Ireland loan.

The Minister for Housing and Urban Renewal, Mr Noel Ahern, said yesterday that the Department of the Environment, Heritage and Local Government was in discussions with several other lenders, and expected them to make similar announcements in the near future.

"I consider it appropriate that there should be an element of competition and consumer choice in the affordable housing mortgage market," the Minister said.

Bank of Ireland and the relevant local authority will share the security on the loans. All normal standard lending criteria, including Bank of Ireland's range of mortgage terms and interest rates, will apply.

All applicants must receive approval from their local authority for a property before they make a mortgage application to Bank of Ireland.

It is anticipated that 11,000 affordable homes are due to become available over the next two to three years.