TWO OF the Republic’s main mortgage providers have introduced rules requiring bigger deposits from purchasers of one-bed apartments.
The changes mean buyers of some one-bed apartments will have to provide deposits of up to 35 per cent before being considered for a mortgage by Bank of Ireland or its subsidiary, ICS Building Society.
The move by the two institutions yesterday is likely to further drive down prices for starter apartments and reflects wider concerns among the banks about the resale value of small units, particularly outside the big cities.
In contrast, the relative popularity of three-bed houses is growing, albeit in a moribund market.
The two institutions have eased the deposit requirement for many bigger properties costing more than €550,000, although there is little activity in the market currently at this level.
A Bank of Ireland spokeswoman said the changes made for one-bed apartment mortgages reflected the risk involved. “We see it as a prudent move rather than a drastic one.”
She said that the bank was one of the few financial institutions in Ireland still providing mortgages for one-bed apartments and pointed out that terms for most mortgages remained unchanged.
The margin between the deposit required for a one-bed apartment in the main cities and that needed by buyers in non-urban areas has widened under the changes.
Bank of Ireland has reduced the maximum loan-to-value (LTV) ratio for one-bed apartments in Dublin, Limerick, Galway and Cork from 92 per cent to 80 per cent; this means a buyer must put up a minimum 20 per cent of the purchase price as deposit.
ICS, which operates exclusively through brokers, has reduced the maximum LTV ratio for one-bed apartments in the four cities from 90 per cent to 75 per cent. On a €200,000 apartment, that means a purchaser will have to come up with a deposit of €50,000 to qualify for a mortgage.
For one-bed apartments elsewhere, Bank of Ireland is reducing the LTV ratio from 85 per cent to 70 per cent. In the case of ICS, the LTV drops from 85 per cent to 65 per cent.
ICS has also reduced the amount it is prepared to lend on the basis of a person’s income. For people on incomes less than €40,000, for example, the income multiple is being reduced from today to 4.5 to 4.25 for first-time buyers.
On properties costing up to €550,000, Bank of Ireland will continue to lend up to 92 per cent LTV; the equivalent figure for ICS is 90 per cent. First-time buyers and those trading up who can afford a property costing €550,000- €750,000 will benefit from an increase in LTV ratio at both institutions from 75 per cent to 85 per cent.
On properties costing more than €750,000, the ICS will lend up to 75 per cent of the value, up from 65 per cent.
AIB operates a maximum LTV ratio of 92 per cent, with no regional variations or differences for one-bed apartments, according to a spokesman. He said the issue would be kept under review.
The Professional Insurance Brokers’ Association said a survey of its members showed that up to 80 per cent of mortgage applicants were being refused.
