TWO YEARS AGO, Ireland’s Department of Finance transposed the EU’s Mortgage Credit Directive into Irish law.
There was some fear at the time that among those to suffer due to the new directive would be cross-border workers in Ireland – those living in the Republic but working in the North.
At the time the Central Bank confirmed that there were no legal impediments for such workers being able to gain access to a mortgage. It also confirmed however that whether or not such a mortgage would be provided would be up to the lending institution in question.
Recently, Donegal woman Jennie Peoples and her husband called to a branch of Permanent TSB with a view to starting the ball rolling on acquiring a second mortgage on an investment property.
Both are in well-paying jobs. Jennie’s husband works in Donegal. She however works a short hop across the border in Derry city. She is paid in sterling. When the issue of salary and employment was raised at that meeting, a refusal was immediately delivered when her working situation became clear.
Immediate refusal
“We already own a house, but not with Permanent TSB,” she told TheJournal.ie. “So we made an appointment with them, having seen all their advertising campaigns and that kind of thing, and having heard their rates are probably best at present. It’s something we’d been thinking about for a while (the couple’s current mortgage is in its fifteenth year).”
When I said I earn sterling it was immediate – ‘no we don’t accept that’. I asked what they meant, I’m a resident in Ireland like. They didn’t even ask what my husband does. She added that if I lived in Spain and was paid in euro I could get a mortgage. I didn’t even argue back, I was just confused. So I said I’d look into it.
TheJournal.ie queried a number of mortgage-providing banks operating in Ireland as to their policy with such mortgages.
AIB (and its subsidiaries Haven and EBS) “facilitate mortgages for customers who reside in the Republic of Ireland but have earnings in sterling from employment in Northern Ireland”, a spokesperson said, adding that its policy “is consistent with” the Mortgage Credit Directive.
Ulster Bank also provides such cross-border mortagages “subject to meeting our credit criteria including affordability”, albeit income in sterling, or any foreign currency, must be “adjusted in bringing it into affordability calculations to allow for the potential for future exchange rate fluctuation”.
However, both KBC and Permanent TSB have a policy of flat-out refusal when it comes to cross-border lending, as Jennie found out.
“Permanent TSB does not offer mortgages in cases where the repayments are based on an income denominated in sterling,” a spokesperson said. “This was a commercial decision taken after the EU Mortgage Credit Directive came into force in Ireland.” A KBC spokesman meanwhile said that the bank “does not currently provide mortgages to individuals residing outside of the eurozone, or those who are earning their income in a non-Euro currency”.
Bank of Ireland failed to respond to our query.
So there are options available to cross-border workers, albeit limited ones. And the banks are within their legal rights to refuse such mortgages.
“Brexit is just a sign of volatility, that anything can go wrong,” a mortgage-lending source says of the issue. “And currencies can move. It’s happened in other European countries, like in Poland where many people took loans in Swiss francs because it was cheaper. Then the franc hardened against the (Polish) zloty, and people’s payments doubled.”
It’s even happened in Ireland before. In the 80s lots of mortgages were taken here in (German) deutschmarks. And that went wrong also. Currencies are inherently volatile. And Brexit is an inherently volatile situation.
Regarding the refusal of some banks to entertain the idea of cross-border mortgages, the source says that is something that comes down purely to “a commercial decision”. “There is no appetite for that risk. Such mortgages aren’t widespread either. There are only a handful of such cases you’ll see about the country.”
Fair?
But, legal though it may be, is such a refusal to lend fair to the consumer?
“To deny such mortgages outright is a very, very cautious approach,” Dermott Jewell, policy adviser with the Consumer’s Association of Ireland, says of the situation. “It suggests a concern over Brexit, a concern over sterling, a concern over the volatility of employment. That certainly feels like it’s overstepping the mark.”
It comes down to how the banks are interpreting the Consumer Protection Code (the rules and principles that all regulated financial services have to follow when providing financial products and services to consumers), and that’s something the Department of Finance and Central Bank should be looking at.
Every element of law has to be fair and reasonable, and it seems there are considerations here that don’t even remotely have a firm basis, it’s all speculation.
“It’s as well that it should be flagged for clarity if nothing else,” Jewell added. “The banks have a licence to trade, but after that it looks like they make up their own rules.
“The two of us have grand salaries like,” says Jennie. “And Brexit hasn’t even happened. We’re still in the EU.”
When we were refused, it was like a dead refusal, like a ‘get out’ kind of refusal. I said I earn sterling, I didn’t say we have leprosy.
“It’s just interesting to see, like, what if in the long-term we need a loan? This is before Brexit even happens you know? It’s a bit scary.”
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