Financial institutions should not place parents under undue pressure to borrow against their home in order to give children money to buy their first home, the chief executive of the new financial regulatory authority said yesterday.
Dr Liam O'Reilly, chief executive of the Irish Financial Services Regulatory Authority (IFSRA), said financial institutions must act responsibly and make sure through the way they advertise and the way they provide loans that individuals "know what they are getting into" when they borrow against their home.
"It is a natural tendency for parents to want to help their children, but I think that what we don't want to do is have undue pressure on parents through any means," Dr O'Reilly told RTÉ radio yesterday.
He said lending institutions must follow the codes of practice on rules of engagement with customers. IFSRA, which will be formally established this year, plans to operate a "naming and shaming" policy of institutions who do not follow statutory codes of conduct.
The comments follow the public reaction to advertisements for EBS Building Society's mortgage product FamilyFirst, an equity-release product targeting parents of children trying to get on the property ladder.
EBS's mortgage is the latest in a series of high-profile products that make it easier for people to access the equity tied up in their homes. These include Bank of Ireland's equity-release loan and Permanent TSB's chequebook mortgage One Plan, which gives customers pre-approval to borrow up to 75 per cent of the value of their homes.
Critics say these products discourage people from reducing their mortgage over time, promoting a situation where mortgages remain topped-up throughout homeowners' working lives.
Further transformation of the Irish mortgage market is imminent following First Active's announcement at its preliminary results meeting last Tuesday that it is to become the first lender to introduce a current account mortgage.
Current account mortgages are available in the UK and Australia. Consumer debts can be added to the mortgage, and borrowings and savings can be combined in a current account. The balance on the account is deducted from the debt, reducing the mortgage interest payable.
