State-owned bank AIB has defended its decision to reduce the amount of money it is making available to first-time buyers for mortgages by 10%.
The bank described its new lending criteria as “prudent” despite the fact it goes against government calls for banks to start lending for home purchases to allow buyers to avail of generous tax reliefs introduced in last December’s Budget.
AIB has the lowest variable rates for mortgages at 2.84% but those looking for a mortgage could now qualify for larger loans by turning to the likes of ICS or KBC Bank.
The new rules mean that AIB will only approve mortgages for those who can cope with interest rates going as high as 6% – up from 5% earlier this month.
The move has the effect of lowering the amount of money home buyers are now approved for by AIB.
According to MyHome.ie blogger Karl Deeter of Irish Mortgage Brokers, a couple with two incomes of €35,000 each taking out a 30 year mortgage would have been approved for €348,000 under the old rules but the new rules mean they would now receive just €312,000 – €36,000 down on what they would have got.
A spokeswoman for AIB told The Irish Independent that the rule change was introduced to ensure all lending by the bank was prudent.
She said it was required to stress test borrowers to see if they could cope with lending rates of at least 2% above current rates.
The bank’s actions were in keeping with new provisions under the Central Bank’s consumer protection code.
It was not the case that the bank was pulling back from lending to new buyers. This year mortgage lending was set to rise by €200m to €1bn, the AIB spokeswoman said.