Bank websites imply they are still in the mortgage business but the reality is that they will only lend under strict conditions. So what are these?

THE WEBSITES of AIB, Bank of Ireland, EBS and the other lenders advertise warmly that they are open for mortgage business. Just make that call. But are Irish mortgage lenders operating in a parallel universe with reality? That is what many frustrated customers want to know.

AIB’s website is typically upbeat: “Whether you’re a first-time buyer, trading up or buying an investment property, AIB has a range of competitive mortgage options and services to suit you.” No hint of recession. And maybe no hint of reality.

Yet the turbulence in the European money and bond markets and the high-level ECB meetings in Frankfurt, not to mention our own home-grown banking crises, filter through, within hours, to local level. And the question is whether our lending institutions actually have the money to lend.

The sums that lenders have available to customers change daily, even hourly. Some lenders are practically putting up “closed for business”signs. Earlier this month Permanent TSB’s announcement that it was no longer offering fixed-rate mortgages and was also raising its variable rates by a full 1 per cent is pricing it out of the mortgage market – probably intentionally. EBS followed by announcing no more fixed-rate mortgages for either new or existing customers. Ulster Bank announced a ½ per cent variable rate increase. More announcements are likely.

So what do you have to do to get a loan and how much can you get? One mortgage broker in Dublin estimates that 95 per cent of mortgage applications have trouble getting past the first stage.

First-time buyers who have at least a 30 per cent deposit from verifiable savings go to the top of the queue. Then, depending on the bank and its available funds in any week, other applications also move forward. For every 100 loan applications, there are no more than about 15 loan offers – after varying lengths of time.

The official positions are simple. AIB and Bank of Ireland lend up to 92 per cent of the purchase price of a home. In exceptional circumstances, such as first-time buyers or separated or divorced people buying affordable housing, this may be increased. Others lend up to 90 per cent if borrowers get green lights lights on every front. Borrowers need at least 8 per cent of the purchase price, but for most lenders, 65 per cent to 70 per cent of the purchase price is the real maximum. Lenders also like to see the borrowers’ own equity sourced from savings. They want to see a minimum annual income of €30,000 for an individual or €45,000 for a couple, with evidence of income security.

Expect a clinical examination of finances. With a straight face and without a hint of irony, lenders are demanding clear fiscal rectitude from borrowers.Their requirement lists include payslips for employees in the same employment for three years; audited accounts for at least three years for those who are self-employed; month-by-month details of existing loans; copies of bank account statements for six to 12 months; copies of any separation agreement or divorce order; evidence of monthly rent being paid; details of savings including shares; and details of debts.

Before the recession and the Irish banking crisis, lenders wanted to lend. Their checks on borrowers’ details were not thorough. Now they are. Borrowers’ bank statements are forensically analysed for lifestyle, any missed payments, returned direct debits (a big no-no) and any hint of extravagance. Audited accounts are examined for weaknesses.

“Any single payment missed in the last six months or even 12 months is not good,” says Dublin mortgage broker, John Clare. Lenders now go well beyond the simple checks on borrowers with the Irish Credit Bureau. He says lenders now require clear evidence of ability to pay. Clarity is in, fudge is out.

But it is not all bad news. Mortgage lenders and brokers now spend much of their time renegotiating with borrowers in difficulty. They take a sensible view of the borrower who sees trouble coming and addresses it. These borrowers can still have a future; and a home.