First-time home buyers have been dealt a blow after two leading lenders closed off the option of them getting exemptions from Central Bank mortgage rules.
he move will make it even more difficult for new buyers to get approved for a home loan in a market suffering from a rapid rise in property prices and an acute shortage of homes to buy.
Both Permanent TSB (PTSB) and KBC will no longer allow first-time buyers to get an exemption from the rule limiting the amount they can borrow relative to their incomes.
The so-called LTI (loan-to-income) rule means people can borrow only three-and-a-half times their income.
In any one calendar year, 20pc of mortgages that lenders give out to first-time buyers can be above this cap.
Large numbers of first-time buyers need an exemption to the LTI rule, especially in cities and larger urban areas where property prices are higher.
But from today, Permanent TSB said it would be closing off the option for an exemption for first-time buyers.
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The lender, which is hoping to take over the mortgages of Ulster Bank, said single applicants must have a minimum income of €40,000, and €70,000 for a couple.
And KBC has also shut down the option of an exemption for new buyers.
It is understood both lenders have used up their allocation of LTI exemptions for first-time buyers this year.
Part of the problem is that potential buyers are getting mortgage approval in principle, with an exemption, from a number of lenders.
The latest move by PTSB and KBC comes as the Central Bank said it was holding “listening and engagement events” next month as part of a review of the lending limits.
The review will look at the effectiveness of rules and whether they have achieved their aims.
Mortgage broker Karl Deeter, of Yes.ie, said the change by the two lenders would mean that a couple whose earnings were just €25 a week below the threshold to qualify for a mortgage would be condemned to paying high rents for longer.
“What we are seeing is a situation where on one hand, the Government is trying to help first-time buyers with new rules but where the Central Bank’s rules are stymying the lenders trying to support the same people.”
He said a couple each earning the average full-time wage of €45,000 could borrow €315,000, which would cost €1,245 a month over 30 years.
But because the couple wants to borrow €340,000, they have to get an exemption.
This loan would cost €1,345, but the monthly payment is only €100 higher.
“This sum is often the difference between home ownership and reckless renting because the rental market doesn’t have rules and you can be hit with far higher prices that you are not protected from – indeed you may have no choice.”
He said the same people might be stuck paying rents of €1,600 a month. “Over-extending yourself is bad, but if you are thrown to whims of a far more costly rental market, then you might never own a home,” Mr Deeter said.
Permanent TSB said it managed its allocation of exemptions on an ongoing basis throughout each year.
It said that from time to time it closed off its LTI exemptions for a period of time to ensure it stayed within the regulatory limits.
“However, this does not mean that we will be closed for first-time buyer LTI exceptions for the remainder of the year.”
It added that first-time buyer customers who had been granted an exemption, and who had an approval in principle, would retain that exemption for the duration of their approval.
KBC said that, like all mortgage lenders, it had to follow and continuously monitor the guidelines set by the Central Bank on the lending limits for residential mortgages.