High rejection rate associated with state mortgage scheme linked to repayment capacity – The Irish Times


The majority of people who turned down a home loan from the local government failed to demonstrate adequate repayment capacity or had credit histories deemed “unsatisfactory”, the Housing Agency said.

The agency was responding to a question about the high rejection rate associated with the state-backed program.

The initiative, which provides mortgages to first-time buyers and new applicants who have been turned down by traditional lenders at a reduced rate, is one of several government programs aimed at boosting home ownership here.

The agency assesses applications and makes recommendations, but the relevant local authorities have the final say.

Figures obtained from the Department of Housing and published in The Irish Times earlier this week show that 55% of the 1,310 applications received so far this year have been recommended for rejection.

The “recommendations to decline” fall into three main categories, according to the agency. The first occurs when the applicant’s ability to repay is not demonstrated, that is to say when “the applicant does not have sufficient funds to repay the loan each month”, she specifies.

The second reason for denial occurs when projected monthly repayments exceed the allowable percentage of monthly net income (maximum 35%) under the plan’s credit policy.

Credit assessment

The other reason relates to “an unsatisfactory credit history” when an applicant’s prior credit has not been repaid according to their agreed/contracted repayment schedule.

“The community’s housing loan applications are assessed on the basis of the regulations establishing the scheme and the credit policy underlying the scheme. The Housing Agency carries out a centralized credit assessment of loan applications and issues recommendations to local authorities, who make the final decision,” the agency said.

The Local Authority Housing Loan came into play this year following the Rebuilding Ireland Housing Loan and is the latest iteration of government backed mortgages. The new scheme is part of the government’s Housing for All plan, which primarily aims to further support homeownership for “creditworthy buyers who otherwise struggle to access sufficient finance”. Local authorities will have 250 million euros to lend under the program for 2022.

Cork County Council received the most applications this year (144), followed by Dublin City Council (117), South Dublin (88), Louth (85) and Fingal (84). Urban areas received the most applications and reportedly had the highest refusal rates due to relatively high housing prices.

House price growth slowed for the second consecutive month in May amid signs of a market slowdown in the face of rising living costs. June figures are expected to be released later today.


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