Avant Money, one of the country’s newest mortgage providers, said the current loan-to-income ratio rules are a challenge for middle incomes and lenders should be able to factor in payments from rent when evaluating borrowers.
Brian Lande, Mortgage Manager at Avant Money, made the comments during an interview with the Independent Sunday.
Regarding the review of the Central Bank of Ireland’s mortgage rules, Lande said Avant Money supported the macroprudential rules and was eagerly awaiting the results of the review of loan ceilings.
“I think the loan at the rules value of 80pc-90pc [are something] we’re comfortable with it as a lender. We believe that people need to bring some sense of fairness, deposit, or savings to a mortgage proposal.
“From a moral hazard perspective, we think it’s important that customers can contribute. The 100% mortgages of the past were part of our financial crash problem in the last sequence. “
However, Lande said he believes the 3.5 times income loan-to-income rule “will clearly challenge middle-income earners,” citing teachers as an example.
“The inflation in house prices is such that it starts to charge them even outside the suburban belt in some cases. There is a reasonable argument for the CBI to look at what we call “prudent repayment capacity”, so when a person has been able to finance rent at a higher level, this must be taken into account. There is something reasonable about this. “
Lande said he believed house prices were rising due to a lack of supply, not CBI rules on mortgages.
“There is a huge demand. Many people built up their savings and deposits during the lockdown. There are a lot of very well paid people in the Dublin market … Too many people are chasing too few houses.
Lande added that about half of those applying for a mortgage with Avant Money did not have any properties identified when they applied.
He said it was standard practice for banks to give people six months approval in principle, which would have been enough to buy property in the past. However, Lande said Avant Money saw an increase in the number of people returning after six months to renew their approval in principle after failing to find accommodation.
“This indicates that they are not able to find a property during this period,” he said. “I do not have a precise number, but it is certainly more than 50% of these candidates [who] come back at least for a “second loop”.
Lande said Avant Money received € 1 billion in mortgage applications in the year since the product launched last September.
He expected Avant to have drawdowns equivalent to around 3% of the mortgage market this year, which he said will reach between € 9 billion and € 10 billion in drawdowns.
Before Money plans to expand. He said he currently serves about three-quarters of the market and expects to serve more than 50 brokers over the next six months.
“We are here to deliver great value,” he said. “We certainly do that in mortgages, we being pretty much the lowest price in almost all mortgage bands and products.”