Many Ulster Bank mortgages would break Central Bank rules

Ulster Bank has told the Oireachtas finance committee that some 68 per cent of all of its mortgages to first-time buyers this year would have fallen outside the new loan-to-value and income thresholds that the Central Bank of Ireland is planning to introduce from January 1st.

“The proposals as they stand, will impact the ability of many first time buyers to acquire their home,” the bank’s chief executive Jim Brown said. “In addition, other hopeful first time buyers will struggle to save a higher deposit while paying increasing rents.”

The Central Bank has proposed that borrowers should be required to have a minimum deposit of 20 per cent, with some exceptions, to receive a home loan while lenders must also apply a 3.5 times loan-to-income ratio when considering applications. Its proposal is out to consultation until December 8th.

90 per cent mortgages

Mr Brown said Ulster Bank provides mortgages of up to 90 per cent of the value of a property while the loan-to-income income thresholds it applies are up to 4.5 times. Mr Brown said 85 per cent of its mortgages are at income levels of 3.5 times, which would be within the Central Bank’s new guidelines.

Mr Brown said Ulster Bank expects to provide €500 million in new mortgage lending this year, adding that it has introduced a series of new fixed-rate mortgages. He said its variable rates are constantly under review but declined, for commercial reasons, to give specifics to the committee about the cost of funding for the business in the Republic or its net interest margin south of the border.

Ulster Bank was criticised by Fianna Fáil’s finance spokesman Michael McGrath for the answers to the questionnaire supplied to the committee in advance of the meeting. Mr McGrath described it as of the “poorest quality”.

Mr Brown also fielded questions about Ulster Bank’s record €3.5 million fine from the Central Bank, imposed for the failure of its IT systems in the summer of 2012, which left customers without access to their accounts for up to 28 days.

IT investment

Mr Brown said the bank has “invested heavily” to “avoid any similar incident happening again”.

Mr Brown said Ulster Bank has paid €59 million in compensation to customers in the Republic affected by the systems failures, with the cost for the bank across the island amounting to about £100 million.

In response to a question from Sinn Féin's Pearse Doherty, Mr Brown said he was "satisfied" with the process that led recently to EY being appointed as the bank's auditors. Mr Doherty had questioned the appointment given that EY had been auditors to Anglo Irish Bank before its nationalisation and collapse.