Getting a mortgage over the recent year has proven to a high hill task; more recently is the COVID-19 pandemic that has affected the world economy in different ways. In Ireland, the mortgage market has been on-demand as properties price has been increasing over a fortnight ago. Research from central banks has shown that many banks have reduced the rate of mortgages despite the high prices of properties, especially in cities and coastal regions of Ireland. The big question that many ask is: why are few or no banks giving out mortgage loans?
Many banks have feared giving out loans because of many reasons about economic stability. Moreover, different types of loans are now more challenging to obtain due to the pandemic’s economic and employment effects, as the mortgage market has been severely harmed. As the prices of properties continue to surge, many banks are opting away from giving out mortgage loans because of the following: –
- Economy meltdown or recession. The lockdown demonstrates that Irish banks still have a large number of credits on their books due to non-performing loans that are either in arrears or have not been repaid, allowing the bank to select services that keep them free of losses and remove mortgage credits.
- Market size. Ireland, as a smaller country, has a much smaller mortgage market. As a result, many lenders are moving away from mortgage loans due to a lack of economies of scale.
- Fear of bad debt. Banks have different ways of giving out money, and the mortgage is one option. The current economic stalemate has affected many people and businesses, making banks look for alternative returns without yielding losses caused by bad debt.
- Borrowers’ credit demand is low.
- Lack of repossession. In Ireland, a bank cannot take ownership of a property if a person fails to pay. Due to the long and complex repossession process caused by political and legal impediments lenders face, this causes few banks to invest in mortgages.
- Customer credit score. Bank know that mortgage loans are one of the risker ventures, hence giving clients loans depends on a higher credit trustworthy to access the loans. Bank as for large deposit and guarantors of which a few people can afford making it hard to provide the loan. This causes some banks to avoid giving mortgages and channel their money and services on other money profit programs.
- Lack of competition. Research shows that the Irish mortgage market remains heavily concentrated in the hands of a few major banks, resulting in a lack of competition and higher interest rates. Furthermore, anecdotal evidence suggests that certain foreign lenders and investors are being turned down for entry into Ireland due to the risky nature of their lending, resulting in low local investment, which makes many banks not offer a mortgage.