A NUMBER OF mortgage applicants who received approval prior to the Covid-19 crisis in Ireland are now faced with uncertainty on whether they can draw down their mortgages, with some having their approval pulled because they’re in receipt of the government’s temporary wage subsidy scheme.

In many cases, the income of those in receipt of the subsidy hasn’t declined and their pay slips show they’re earning at the same level they were pre-Covid. 

Last week, TheJournal.ie reported that a married couple who were about to move into a home prior to the pandemic restrictions in March were told by their bank that because one of them is on the wage subsidy scheme, they wouldn’t be able to draw down their mortgage.

This is despite already signing contracts and paying their deposit on a new build home outside Dublin. 

Since then, TheJournal.ie has spoken to a number of other mortgage applicants now facing an extra bit of uncertainty as they too are on the wage subsidy scheme. They are now either unsure if they can draw down their mortgage or have been told by their bank that they cannot. 

Complaints

New figures show that almost 270 complaints about mortgages have been made to the Financial Services and Pensions Ombudsman since the beginning of March, and the matter has been raised on a number of different occasions through parliamentary questions in the Dáil. 

We also asked the five main banks – AIB, Bank of Ireland, Ulster Bank, KBC and Permanent TSB – for their response to why customers who were previously approved for mortgages were now being told that approval was being pulled. 

Each one said they had to be prudent when providing mortgages and offer drawdown based on the last available financial information of applicants.

In the case of Permanent TSB, it said that when employers provide assurance on the sustainability of an applicant’s income when the wage subsidy comes to an end, it would work to facilitate those customers.

Uncertainty

Under the temporary wage subsidy scheme, the government pays a percentage of a worker’s wage in companies and industries that have experienced losses of revenue and earnings during the pandemic. 

According to the most recent figures from the Department of Employment Affairs and Social Protection, there are 59,000 employers registered for the scheme. 

A further 520,000 workers have received at least one payment on the scheme. For many employees, they are not suffering a loss in income despite the problems facing their employers due to Covid-19. 

Facing calls from businesses under pressure given the loss of revenue during lockdown, the government has extended the wage subsidy scheme until the end of August.

Employers groups have called for further extensions to the scheme, with the possibility of tens of thousands of employees having their wages subsidised into the near future.

That would leave mortgage applicants on the scheme in a difficult situation going forward, if they are left uncertain over whether or not they will be able to buy a home. 

In several cases, customers at different banks said they’d been told that the bank required wage slips to show whether or not they were in receipt of the wage subsidy scheme before they could proceed.

If they didn’t, or showed wage slips to show they were on the wage subsidy scheme, the bank was unwilling to proceed with the mortgage at this time, despite already granting approval.

In one situation, Margaret* said she and her husband are finding it difficult to find any clarity from their bank when it comes to the subsidy. 

She is self-employed and her husband is in receipt of the wage subsidy scheme.

They were in the latter stages of being about to purchase their home – including receiving approval and putting a deposit down – when Covid happened. Now the timeline of that process has been made uncertain, they don’t know when they actually progress to the stage of drawing down their mortgage.

“We have no way of knowing and until then we won’t know what will happen when we go to drawdown,” she said. “The stress is real, and growing.

The money going into our accounts every month hasn’t changed. We’ve been paying rent for years at a similar level to what the mortgage will be. If the banks have a blanket policy of refusing to allow drawdown if the subsidy scheme appears on their payslip, we won’t be able to complete the purchase of the house and will be left paying the same amount every month in rent. It’s a crazy situation.

Margaret said what would help is action from the government directly on the issue and clarity from banks.  

“Our biggest worry is that we’re going to miss out on buying the house that we spent so long looking for and saving for while paying rent,” she added.

“There have been very few suitable houses on the market in our area in the past year and that situation isn’t going to change any time soon.”

Formal complaints

In figures released to TheJournal.ie, the Financial Services and Pensions Ombudsman (FSPO) said that from 1 March to the end of May it received 269 complaints concerning a mortgage product.

It indicated that in the majority of the complaints it receives the complaint must first be made to the financial service provider to allow it to deal with the issue first. If a complaint is not resolved by the financial services provider, a complaint can then be made to the FSPO.

When it came specifically to Covid-related complaints, the FSPO said it had received 100 complaints to the end of March. Of these complaints, 70 related to insurance products with 23 about the banking sector. 

The FSPO indicated that within those 23 complaints in the banking sector, there would have been mortgage-specific complaints.

Bank statements

In response to this matter being raised via parliamentary questions, Minister for Finance Paschal Donohoe said loan offers may contain a condition that the lender can withdraw or vary the offer if, in the lender’s opinion, there is a material change in an applicant’s circumstances prior to withdrawal.

“In such cases, the decision to withdraw or vary the offer is a commercial decision for the lender,” he said.

TheJournal.ie asked the main banks for comments on this issue of applicants on the wage subsidy scheme. 

A spokesperson for AIB said: “AIB is engaging with all customers looking to drawdown a mortgage to ensure their circumstances and ability to pay have not been materially impacted by the uncertain environment caused by Covid-19, and the mortgage is still appropriate for them. 

The bank will consider applications from customers whose employer avails of the wage subsidy scheme.  Our customers are our primary concern in this environment and we will remain prudent in our lending to protect them and the bank.

 A Bank of Ireland spokesperson said: “We understand that income levels for some mortgage applicants have been impacted and we are continuously looking for ways to support customers during the current national health emergency.

“Where income has changed, we are liaising with customers to understand their updated circumstances and if these are expected to change again in the future.

It wouldn’t be a responsible move to provide somebody with a mortgage at a level that they will struggle to afford, therefore where affordability changes we have a duty to discuss this with customers.

“Customers who wish to pause their applications as a result of temporary income reductions are being supported and can continue with their existing approvals once sustainable income is restored.”

A spokesperson for Permanent TSB said: “We have a duty of care to our customers to ensure that any lending is affordable for them. In accordance with consumer protection requirements, we are facilitating mortgage-approved customers on the TWSS in drawing down their loans subject to their employers providing assurance on the sustainability of their income when the TWSS comes to an end. 

“We are doing everything we can to support our customers at this difficult time and are working with them on a case by case basis to assess their individual situations.”

Ulster Bank’s spokesperson said: “All mortgage applications are treated on a case by case basis, there is no automatic approval or refusal.

Like all banks, and in line with our responsibilities as a lender to ensure our customers do not take on unaffordable debt, we require confirmation that customer’s income and employment status remains unchanged as a result of Covid-19. Loan offer customers will be required to confirm if they have been impacted by Covid-19 as well as providing an up to date bank statement prior to drawdown. 

A spokesperson for KBC said: “Each application is assessed on a case by case basis. All approvals in principle are granted based on the information provided by the customer at the initial application stage.

“A full assessment of the customer’s financial circumstances is carried out prior to full approval on all applications where approval has been granted in principle to ensure that the customer is still in a position to afford the mortgage they have requested.

“KBC is not employing a policy of withdrawing AIPs or loan offers however in line with prudent lending practices, updated financial information is being sought from customers prior to drawdown, KBC do not want any customer to enter into a financial commitment that they cannot afford.”

*Names have been anonymised at the individual’s request