Banks and building societies yesterday vigorously defended their mortgage issuing policies, insisting they adhered strictly to home loan guidelines set down by the Central Bank.
Responding to a written warning by the sector's statutory watchdog that their lending criteria were to be closely observed amid deepening economic instability, the institutions dismissed suggestions they had not stooped to irresponsible borrowing to gain a competitive advantage in the increasingly competitive home loan market.
Six lenders told The Irish Times they had written to the Central Bank, assuring it they would continue to closely observe its stipulation that a mortgage applicant's income should be verified either through a P60 tax form or audited accounts and that clients' applications were stress tested to ensure they could meet their monthly payments in the event of a 2 per cent rise in interest rates.
A seventh, AIB, said its governors would consider the matter at its monthly meeting in early December and would issue a response in the following days.
The bank said it was not in the business of granting mortgages to customers who could not afford to repay them. All applicants were stress tested and there had been no increase in the rate of loan defaults, it said.
The average value of first-time buyer mortgages since the start of the year is €140,000.
Bank of Ireland said it stringently followed the Central Bank guidelines and had not relaxed its rules in the face of rising house prices. The average mortgage for the first nine months of the year was €135,000.
The Irish Nationwide building society said it had constantly exercised prudence in lending and adhered to the Central Bank stipulations. The average value of mortgages issued to first time buyers since January is €180,000.
National Irish Bank said it did not generally exceed the Central Bank criteria, though it did "in exceptional" circumstances relax its rules for applicants with substantial deposit savings.
IIB Homeloans said it maintained high levels of discipline with regard to lending.
Chief executive Mr Brian MacManus said the bank endeavoured to prevent customers from getting into financial difficulties. IIB's average loan amount is €140,000 and its mean loan to value ratio is 60 per cent.
IIB announced it was lowering fixed interest rates for new two-, three- and five-year mortgages by 0.3 per cent, in anticipation of an interest rates cut by the European Central Bank (ECB).
Permanent TSB said it was "very comfortable" with its lending criteria and regularly consulted the Central Bank on the matter.
The EBS building society said that it was confident it did not issue loans to borrowers who were in danger of defaulting.
