The AIB has implemented regulations that have started to severely lower the time that it allows potential home buyers to look from a new home. This time frame went from 12 months to half of that. The reasoning the AIB has given for this is that it increases the approval in principle.
Two weeks ago, on January 15th, AIB made up of around 33% of the mortgage market. The bank announced that it will no longer allow the individuals who received mortgage approval 12 months ago to draw down their loans. These individuals will instead have to do so within 6 months, which is the normal time frame for most other banks within the market. The change is said to only apply to new applicants and that if you were an individual that applied in the 12-month period before January 15th of this year, the 12-month period will still apply to you.
AIB has previously one of the only banks to offer an extended amount of time for consumers to draw down a mortgage, which was one of its largest selling points. But the industry standard has long been a mere 6 months.
Following the more recent payslips within the economy, as well as the outstanding debt the State is burdened with, the customer’s financial situation has changed much since when approval was first given. AIB did not specify when it would address this but commented on how it is still “lending policies under constant review in response” to the more volatile economic environment we are experiencing.
COVID would be a leading drive in why AIB is tightening its control over the mortgage applicants. In 2020, the bank stopped lending to individuals that were on the pandemic wage subsidies, but it is still understood that it is extremely difficult to get mortgage approval when an employer is still using such government subsidies.
Another factor that may have caused the legislation change within AIB could be the rules set by the Central Bank of Ireland. Banks are generally allowed to lend more than 3.5 times the income for up to 20% of its book to first time buyers. And from there, 10% more for subsequent buyers. These exemptions were given on an annual basis, which means that the time frame to determine who falls into which category is not crystal clear. With these new implementations, lending policies are easier to give to consumers.
Lucas Zhang was a Finance major at Ohio State University. He writes about finance, mortgages, and technology for Irish Mortgage Brokers.