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Covid-19 has 'dramatic effect' on government mortgage scheme for first-time buyers as drawdowns plummet

Approvals and drawdowns on the Rebuilding Ireland Home Loan scheme fell significantly from March onwards.

File photo.
File photo.
Image: Shutterstock/Lloyd Carr

THE AMOUNT OF money drawn down on a government-run mortgage scheme for first-time buyers has fallen significantly since the onset of the pandemic, with Covid-19 having a “dramatic effect” on the running of the scheme. 

Whereas over €46 million was paid out in mortgages to 276 applicants in the second quarter of 2019, just €14.8 million was paid out in the second quarter of this year to 94 applicants.

Loan approvals have also significantly fallen compared to the same period last year, with just 63 compared to 302 in the second quarter of 2019.

The Rebuilding Ireland Home Loan (RIHL) is a mortgage for first-time buyers which you can avail of through your local authority. The buyers can use the loan to purchase a new or second-hand property, or use it for a self build.

It can offer up to 90% of the market value of the property making it an appealing option for those looking to get a mortgage who may not be able to meet the criteria for a mortgage with the banks.

The scheme has had issues in the past – such as needing significantly more funding than originally planned – but even a couple of months into the pandemic then-Housing Minister Eoghan Murphy was urging local councils to show “flexibility” to people applying for the RIHL

Similarly to problems encountered by people drawing down mortgages from the banks (even by those with prior approval) applicants on the RIHL have faced difficulties securing mortgages if in receipt of the government’s wage subsidy scheme. 

A circular issued to councils by the Department of Housing on 6 July advised that applicants could only proceed to drawdown the mortgage when they could show they were off the wage subsidy scheme for three months. 

Minister for Housing Darragh O’Brien has said this doesn’t amount to a ban on such applicants as the scheme is still accepting applications, even from those on the wage subsidy scheme.

However, Sinn Féin’s housing spokesperson Eoin Ó Broin told TheJournal.ie it is effectively a “blanket ban” on applicants moving to draw down if they are on the wage subsidy scheme.

He said: “We’re not arguing for people to be able to drawdown risky loans. We want them to be assessed on a case-by-case basis. If my employment is secure, a local authority should be able to move to drawdown.

I’ve had constituents in full-time employment whose hours or pay has not changed. Their employer is availing of the wage subsidy scheme, but is well placed to recover after the crisis. If an employment is precarious, that’s different but a blanket ban is too crude an instrument for this.

He also said that the fall off in drawdowns may not necessarily be purely a refusal from the local authority side to move to draw down. He said that people could also have assessed their situation and decided it wasn’t the right time to proceed with getting a mortgage. 

TheJournal.ie has spoken to a number of applicants on the scheme who’ve been either refused a loan or unable to reach drawdown stage in recent months. 

Two sets of applicants – one a couple in the west of the country, another a single applicant in the south – were unable to move to drawdown due to being in receipt of the wage subsidy scheme.

The details 

The difficulties being felt by some are mirrored in the figures – both in terms of mortgages approved and mortgages paid out comparing 2020 with last year.

In the first three months of 2019, 272 mortgage loans were approved and a further 280 drawn down and paid out to a value of €47,741,744.

In the first three months of this year, 172 mortgage loans were approved and a further 189 mortgages were drawn down and paid out to a value of €32,864,358.

In April, May and June, just 63 mortgages were approved under the scheme. 

In 14 of the 31 local authorities, no mortgages were approved. 

In the entirety of 2019, €183 million was paid out for mortgages through the scheme. In the first half of this year, €47.7 million was paid out. 

Ó Broin added that the full extent of the “dramatic effect” of the pandemic on the RIHL scheme wouldn’t become clear until the statistics for the third quarter were published. 

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A spokesperson for the Department of Housing told TheJournal.ie that Covid-19 was the “primary driver” in the reduction of RIHL approvals.

“As a result of the Covid-19 situation, and similar with mortgage activity in the commercial banks, the rate of RIHL approvals and drawdowns has fallen in 2020 relative to 2019,” the spokesperson said.

Where such persons are approved for a RIHL loan, draw down would not commence until their unsupported income post-[wage subsidy scheme] has returned to the level specified in the original application for a period of time, usually up to three months. This is line with the requirement to lend prudently. 

The spokesperson said that local authorities can still “use their judgement and knowledge of local employers” to advance loans to applicants before the end of the three-month period. 

“In addition, persons currently on the [wage subsidy scheme] can continue to apply for a RIHL mortgage based on their pre-wage subsidy income,” the spokesperson added. “This will provide clarity to applicants regarding their eligibility for the loan amount and will enable them to commence the property search.”

The spokesperson added that figures for the third quarter of this year would be published “in due course”.

About the author:

Sean Murray

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