IPAV, the Institute of Professional Auctioneers and Valuers, has warned that if over-zealous lending restrictions are implemented by banks it will ruin confidence among builders and cause house building to slow to a trickle.
“While no one expects lenders to engage in irresponsible lending, if lending to those on State Covid-19 payments who have jobs to return to are stopped or severely delayed from getting mortgages it is likely to have a devastating impact on the supply of new homes, which are already behind schedule as a result of the pandemic,” Mr Pat Davitt, Chief Executive of IPAV, commented.
Mr Davitt said there has been a patronising attitude towards prospective first-time buyers.
“The current narrative seems to be that aspiring buyers need to be protected from borrowing. In our experience young aspiring buyers are responsible and will of themselves not want to take on debt if they don’t have the confidence that they will have the capacity to repay their mortgages.
“They and their parents have learned from the last financial crash when they were encouraged to believe there was no end in sight to rising property prices.
“In 2007 borrowers were able to negotiate 100 percent mortgages with higher interest rates than today, up to seven times salary on properties that were 40 percent higher than today and we had 300,000 too many properties. Today we have 70 percent to 90 percent mortgages, 3.5 Loan to Income limit on borrowing, cheaper property prices and interest rates and at least 300,000 too few properties,” Mr Davitt added.
Welcoming the move by AIB to revise its stance on the issue, he said while several lenders maintain that they will treat each case on its own merits “the worry is that they have, in fact, become severely risk averse and their interpretation of dealing with each case on its own merits may differ in a meaningful way from that of prospective buyers and others.”
Mr Davitt said he believes damage has already been done, it is difficult to see how builders would want to continue to build if only the select few could get mortgages.
“I believe we will be back to 17,000 new builds this year, over-zealous lending restrictions will kill confidence at a time when we need positivity. Supply is already negatively impacted by the pandemic and trying to recover,” Mr Davitt concluded.