The Association of Irish Mortgage Advisers (AIMA) is calling on lenders planning to raise mortgage interest rates to give borrowers who have been approved for a loan eight weeks’ notice to proceed to the drawdown stage, locking in their original rate.
Finance Ireland on Monday became the latest Irish lender to raise rates following the European Central Bank’s recent policy-rate hikes, aimed at cooling red-hot, euro-zone inflation. The lender initially gave its customers five days to proceed to the drawdown stage before the higher rates kicked in, but later extended this to 10 days.
AIMA has warned that such short drawdown windows could result in “the loss of deposits and house sales falling through”.
The association has warned that some notice periods on new, higher-rate offers “are simply too restrictive and will jeopardise mortgage approval and house sales”.
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Consequently, “thousands of would-be homeowners could see their purchase agreements fall through in the coming weeks” or it could force borrowers to take mortgages at an increased rate with no time to avail of cheaper options elsewhere. This would not be “in the best interest of consumers”, AIMA said in a statement on Thursday.
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“Moves by lenders of late to introduce rate increases are expected and understandable,” said Trevor Grant, chair of the association. “But what is not expected are very narrow time frames offered to consumers who are in the throes of the property purchase process and mortgage switching to avail of the lower rates which were originally offered.
‘Non-refundable deposits’
“This situation could potentially be disastrous for the people affected,” Mr Grant said. “Mortgages invariably take months from first application to closing. However, thousands of people who are well-advanced in the process are now being asked to close within a very short time frame that is for most simply not possible. Many applicants will have signed contracts and paid potentially non-refundable deposits to purchase their new home.
“Equally, a number of those approved may not have sufficient time to organise alternative and more appropriately priced mortgages.”
AIMA is asking lenders to commit to a consistent notice period of eight weeks to allow customers who have been approved for a mortgage to proceed to drawdown.
“We now need understanding and consistency from lenders across the board and a lengthier, more practical, notice period for applicants who will be impacted by these rate increases,” Mr Grant said.
In a statement, Finance Ireland said, following Monday’s announcement, it discussed the matter with its brokers, negotiating a one-week extension with its funding partners to the initial deadline by which it can fund new drawdowns at existing rates.
A spokesman said: “We have briefed brokers on this development, which means that mortgages drawn down before close of business on Friday, October 14th, can avail of the old rates. Mortgages drawn down after that date will be at the new rates. While we regret the impact of this short notice period for customers, these rate increases are unfortunately necessary given the significant increase in funding costs in recent weeks.”
