MORTGAGE APPLICANTS WHO are in receipt of the wage subsidy scheme are facing problems not only with the banks on moving to drawdown – but also with a government-backed mortgage scheme for first-time buyers.

TheJournal.ie has reported numerous instances of people facing difficulty moving to the drawdown of their mortgage – even with prior approval – because their employer has availed of the wage subsidy scheme. But more and more applicants on a government-backed loan are in a similar situation. 

The Rebuilding Ireland Home Loan (RIHL) is a mortgage for first-time buyers which you can avail of through your local authority. The buyers can use the loan to purchase a new or second-hand property, or use it for a self build.

Former Housing Minister Eoghan Murphy said in May that local councils were being asked to show “flexibility” to applicants during the Covid-19 crisis. However, a circular issued by the Department of Housing on 6 July advised that applicants could only proceed to drawdown when they could show they were off the wage subsidy scheme for three months. 

Opposition TDs have said this means there’s a de-facto ban on applicants for the RIHL who are in receipt of the wage subsidy scheme, but that has been denied by the new Housing Minister Darragh O’Brien. 

Independent TD for Galway East Sean Canney told TheJournal.ie that a number of his constituents have now had to put plans to either build or buy their first home on hold.

“They had no hand, act or part in going on the [wage subsidy scheme],” he said. “Their work is the same, their hours are the same, their income hasn’t changed. If the [wage subsidy] goes on until March next year, people could be facing up to a year’s delay.

The government isn’t helping them. What chance have they with the banks?

Wage subsidy scheme and the banks

Under the wage subsidy scheme, as part of the government’s actions to try keep people in employment during the Covid-19 crisis, businesses adversely affected by the pandemic could apply to have a large portion of their employees’ wages paid by the State.

For many people, their income will not have dropped under the scheme and the government has said the initiative was vital to keep people in a job where otherwise they might not have had one given the sharp, sudden shock of Covid-19 and the restrictions that followed. 

This week, just under 70,000 employers in total had applied for the scheme and 390,000 workers are still in receipt of it. 

TheJournal.ie has previously reported how banks are refusing to proceed to drawdown for many customers – who already had received approval – because they are on the wage subsidy scheme. 

In response to numerous queries from TDs, Minister for Finance Paschal Donohoe has repeatedly stated that he cannot influence the commercial decision of the banks in this regard.

Documents released to TheJournal.ie under the Freedom of Information Act show briefing materials prepared for the Taoiseach and Minister Donohoe ahead of a meeting with bank CEOs in May.

The note says: “Lenders are aware that many of their customers have been impacted by the current Covid-19 crisis and I have been informed that they have supports in place to assist customers across a range of areas, including in relation to the mortgage provision process, and that they will continue to bring as much flexibility as possible to assist Covid-19 impacted customers. I would support and encourage lenders in this regard.

However, it is ultimately a commercial matter for individual lenders to set their own lending policies and to make their own lending decisions – including in relation to the nature and type of income to take account in a mortgage application assessment – and I cannot instruct banks in that regard.

Donohoe met with the banks again, alongside Minister for Public Expenditure and Reform Michael McGrath, in mid-July and has said the three main retail banks provided assurances they are taking a “fair and balanced approach” and assessing customers on a “case-by-case basis”. 

This is not an experience felt by many customers, across a number of different retail banks. When they’ve asked why they cannot proceed to drawdown, they’ve been told the bank’s policy is not to allow this for people still in receipt of the wage subsidy scheme.

This week, one woman told TheJournal.ie that because she cannot secure a letter of offer from her bank, the vendor has threatened to put the house back on the market. 

“It has taken me two years to find this house,” she said. “I am just one of many people left totally powerless by the inaction of the banks on the issue.”

AIB’s letter to government

The banks have denied that there is a ban on progressing through the mortgage application process for applicants on the wage subsidy, and emphasised that they must be prudent in their lending practices and be sure the customer can repay the loan. 

However, in a draft statement sent by AIB to senior officials in the Department of Finance on 30 June outlining the bank’s position, it said: “Customers with Approval in Principle, which lasts for 12 months, will be immediately moved through the process when their income levels are no longer dependent on state subsidies.”

Here, the bank says that people with approval cannot progress until they’re off the wage subsidy scheme. 

A letter sent on 1 July from the Department of Finance to AIB was not released under Freedom of Information because “the public interest is best served by refusing access to this record”. But a reply sent by AIB to the department on the same day was released.

It said: “We have released a statement which clarified our position in relation to Covid-19 impact customers and their mortgage applications. It is regrettable that our position was not clear and transparent in recent days.”

On that same day, AIB issued a statement to say it would be accepting applications but would move to ensure all loans are “sustainable and affordable”. 

In a statement to TheJournal.ie last month, an AIB spokesperson said the bank has continued to facilitate the drawdown of funds for customers who had a letter of offer pre-dating Covid, but the “the final assessment of the customer’s ability to meet repayments is always made shortly before drawdown”.

“In order to protect the customer, the bank and the wider economy against the risk of future financial difficulty, AIB is obliged to ensure that all loans are sustainable and affordable,” the spokesperson.

Rebuilding Ireland

One of the measures proposed by the last government to allow people the chance to purchase a home was the Rebuilding Ireland Home Loan.

The scheme has not been without its problems – but it has led to over €500 million in funding being made available to first-time buyers to purchase a home.

Sinn Féin’s housing spokesperson Eoin Ó Broin has said there cannot be a blanket ban on people in receipt of the wage subsidy. He said that he wouldn’t advocate giving the loans to those who can’t pay it back and urged the minister to “be honest with those approved in principle who are waiting to draw down funding”. 

Minister O’Brien, who has said there is not a blanket ban, but the need to be off the wage subsidy for three months before drawdown is “in line with the requirement to lend prudently”. 

He added: “There are exceptions to this approach. In the case of a joint application where only one party is on TWSS, the application can also proceed to drawdown if repayment capacity can be assured based on the other person’s income.”

Canney, meanwhile, said that to now not allow people be able to drawdown a mortgage through the scheme because they’re on the wage subsidy was very disappointing.

“It’s flying in the face of the stimulus to other parts of the economy,” he said. “These are young people willing and brave enough to take that step to buy a home. Because of a decision their employer made.

We have brave young people who want to own their own home, they are prepared to take on a mortgage. They are not a burden to the State, yet the State is preventing them progressing with their dream home. Unfortunately, our banks are playing the same game. This will result in a slowing in house building at a time we are spending billions on a stimulus for the economy.