A YOUNG COUPLE who had secured mortgage approval to buy their first home have had this approval withdrawn by their bank because one of them is availing of the temporary wage subsidy scheme. 

Having spent the last number of years saving up enough to secure a mortgage and putting a deposit down on a new build, they now face uncertainty over whether they can move into the house they’ve already signed all the contracts for.

The situation also means that they may not even get their deposit of roughly €30,000 back. 

Wage subsidy scheme

At the onset of the Covid-19 crisis in Ireland and at a time when businesses were shutting doors around the country, the government introduced the temporary wage subsidy scheme. 

Under the 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 57,800 employers registered for the scheme. 

Furthermore, there are over 500,000 people who are being paid under the wage subsidy scheme. While the scheme was initially rolled out until mid-June, the government has indicated it will continue into August.

Laura* works in hospitality while her husband has a job with a State Agency. 

Despite the downturn in that sector due to the pandemic and the negative effect it has had on her company, Laura still works 40 hours a week in her job in a senior role and has done so throughout the crisis. She’s worked at the company for over a decade.

Like thousands of others looking to buy a house, they’ve been saving hard for a deposit for a mortgage in recent years. They’ve been renting in Dublin while trying to save. 

Late last year, they got to the stage they needed to – they had enough for a deposit and had also identified where they wanted to live at a new build outside the capital. 

They saw the as-yet-unfinished house last October, put money down and began to sign contracts.

“We were told March would be the date of closure (the last step of purchasing a home),” Laura told TheJournal.ie. “But when Covid hit, that kept getting extended. And the construction site where the homes were being built closed up in March.”

With the house not yet finished and ready to move into, Laura and her husband applied for an extension to their mortgage approval which expired in April. 

“We heard back from them two weeks ago,” she said. “They asked me if my pay was affected. I said no, because it isn’t. I’ve been getting paid as normal.”

‘We can’t accept it’

The bank requested her most up-to-date payslip for the end of May, which she supplied. For those on the wage subsidy scheme, payslips specify how much the government has contributed to your wages. 

She received a call from the bank last week to inform her that because she’s on the wage subsidy scheme, the bank cannot progress with giving her the mortgage. 

“They just said ‘we can’t accept it’,” she said. “I couldn’t believe it. When I got the call, I broke down. I was in a bit of a state.”

Laura requested written confirmation that this was in fact the bank’s position and is now unsure what she can do next. 

“We’ve got contracts signed. The lot. There’s apparently nothing they can do at this present time until I can prove I’m no longer receiving some of my income from the State,” she said.

Building has resumed at the home she had planned to move into, and it is expected to be completed over the summer. 

She said: “People are saying to me ‘it’ll all be okay’ but then I say ‘tell me how’. I can’t see a light at the end of the tunnel on this.

I’m feeling very down. What was all our hard work and savings for? The people who have mortgages – the banks said they can get a break. We’re here begging to pay, we want to give them money. They’re not letting us. I just don’t get it. 

Banks approach

During the crisis, the Banking and Payments Federation Ireland (BPFI) has said existing mortgage approvals are not affected by Covid-19.

In guidance on its website, it says that lenders may extend the period of mortgage approval “where your circumstances have not materially changed as a result of Covid-19″.

This extension will be likely 3-6 months. 

The BPFI goes on: “However, if your circumstances have materially changed as a result of Covid-19, your lender may keep your application open on its system for a period of time; but this again may vary depending on the lender’s assessment of an individual’s circumstances.”

TheJournal.ie asked the BPFI if banks are refusing to allow customers who’ve secured mortgage approval draw down their mortgage if they’re on the wage subsidy scheme. 

A spokesperson said: “In our recently published guidance in respect of the mortgage application and approval process during Covid-19 BPFI outlines that as customers move through the various stages they may be asked to confirm that their employment and income situation has not materially changed.

In cases where changes have occurred, and depending on the circumstances of each individual case, a review with the applicant may  be undertaken by the lender to determine whether or not the applicant can still afford to make agreed regular mortgage repayments. 

“This approach is considered to be clearly in the interest of both the customer and the lender to ensure that mortgages are not extended to those who cannot now or in the immediate future afford them. This is also in line with regulatory requirements set out by the Central Bank of Ireland to ensure that borrowers can afford the loans they take out.”

‘Serve the public interest rather than punish people’

Speaking on the issue, Labour TD Ged Nash has called on the Minister for Finance to prevent banks withdrawing mortgage approval from workers whose employers are using the wage subsidy scheme. 

“Let’s not forget that the State holds a significant shareholding in Permanent TSB (75%), AIB (71%) and Bank of Ireland (14%) – so it is completely unacceptable that these institutions would now leave thousands of people in the lurch,” Nash said. 

“Banks, particularly those that are predominantly State-owned, should be serving the public interest rather than punishing people trying to buy their own home, many for the first-time.

We have already seen a sharp drop-off in mortgage approvals of up to 10% in March, which will inevitably have a knock-on effect for areas like construction, particularly at a time when we need to urgently build more public, private and affordable.

Speaking in the Dáil late last month, Minister for Finance Paschal Donohoe said that “[his] view is that participation in the wage subsidy scheme should not be a reason for treating an applicant in a different way”.

However, in a separate parliamentary question on the same topic, Donohoe said: “A loan offer may contain a condition that the lender can withdraw or vary the offer if in the lender’s opinion there is any material change in circumstances prior to drawdown.

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

Labour’s Nash said that Minister Donohoe has been aware of this issue for some time now and must “urgently raise this issue directly with the banks in question and put a stop to this ongoing practice”. 

“The minister must also remind such banks of their social obligations as we enter the next phase of this crisis,” the Louth TD said. 

*Names have been anonymised at the individual’s request