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Two-thirds of first home buyers would not meet new Central Bank rules: Ulster Bank

The bank’s boss is not a fan of buyers having to save a 20% deposit.

Ulster Bank chief executive Jim Brown
Ulster Bank chief executive Jim Brown
Image: Sam Boal/Photocall Ireland

THE HEAD OF Ulster Bank has said over two-thirds of its first home buyers from this year wouldn’t have qualified for their loans under new Central Bank rules.

The bank’s chief executive, Jim Brown, yesterday told the Oireachtas Finance Committee that 68% of Ulster Bank’s customers that had bought their first property this year would have fallen foul of the proposed 20% minimum deposit required.

“The proposals, as they stand, will impact the ability of many first time buyers to acquire their home,” he said.

In addition, other hopeful first time buyers will struggle to save a higher deposit while paying increasing rents.”

Over the past few days, the heads of the major banks were pulled before the committee and asked for their opinions on the Central Bank’s suggested lending rules as part of a probe into the banking sector.

The official lender wants borrowers to stump up a minimum 20% deposit for properties from January next year, although governor Patrick Honohan recently flagged he was open to loosening the policy.

Only 10% deposit needed

Brown said Ulster Bank currently allowed mortgages at up to 90% of a property’s value – meaning buyers only needed to come up with 10% from their savings.

But the head of AIB, David Duffy, who also fronted the committee yesterday, was more supportive of the Central Bank’s proposition if it helped create long-term stability in the property market.

He warned there could be some “unintended consequences” if the moves were brought in quickly and suggested they be phased in instead.

Brown also faced a barrage of questions over the bank’s mortgage interest rates after he admitted Ulster Bank’s margin – the share of interest it keeps from its overall loan business – was the highest of all the major lenders.

It charges a higher rate for its customers in the Republic than it does for those in Northern Ireland.

READ: AIB will return the €21bn taxpayers pumped into it, but don’t hold your breath on when >

READ: Permanent TSB should turn a profit sooner – but don’t expect cheaper mortgages >

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About the author:

Peter Bodkin  / Editor, Fora

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