BANKS ARE now making more attractive mortgage offers compared to last summer, new research from stockbroking firm Davy shows.

According to a “mystery shopper” exercise conducted by Davy, single mortgage applicants are being offered an average of 7.8 times their disposable income, up from a multiple of seven last summer. “These increases have been facilitated by an improvement in affordability,” it said.

Since last October the ECB has slashed its key interest rate from 4.25 per cent to a record low of 1 per cent.

The average variable rate on offer is now 3 per cent, down from 5.8 per cent last August.

The percentage of disposable income that would be absorbed by mortgage interest repayments has fallen sharply, from 43 per cent to 28 per cent for single applicants, and from 36 per cent to 25 per cent for couples.

Davy suggests that the apparent increase in the willingness of banks to lend into the mortgage market indicates “a reaction on the part of the banks to political pressure”.

Earlier this year, both AIB and Bank of Ireland committed to increase lending to first-time buyers by 30 per cent this year, as part of the Government’s €7 billion recapitalisation plan. However, Davy found that banks are “actively discriminating” against applications to buy apartments.

The maximum loan-to-value (LTV) ratio being offered for apartments is 75 to 80 per cent. This compares to an average LTV of 87 per cent being offered to a single person buying any type of property.

Furthermore, mortgage application processes have become more detailed over the last year, with a greater emphasis on the apartment’s location and the applicant’s job and nationality.

The research also found that parental guarantees and a willingness to rent a room no longer significantly boost the applicant’s loan offer. Although banks seem keen to offer home loans, the stockbroker noted that anecdotal evidence suggests that “unseen obstacles” can arise when it comes to drawing down the loan.