High rejection rate associated with State mortgage scheme linked to repayment capacity

Local Authority Home Loan scheme provides loans to first-time buyers at a reduced rate

The majority of people refused a Local Authority Home Loan failed to demonstrate an adequate repayment capacity or had a previous credit history that was deemed “unsatisfactory”, the Housing Agency has said.

The agency was responding to a query about the high rejection rate associated with the State-backed scheme.

The initiative, which provides mortgages to first-time buyers and fresh-start applicants who have been refused by traditional lenders at a reduced rate, is one of several Government schemes aimed at boosting homeownership here.

The agency assesses the applications and makes recommendations but the relevant local authorities have the final say.


Figures obtained from the Department of Housing and published in The Irish Times earlier this week show that 55 per cent of the 1,310 applications received so far this year have been recommended for rejection.

The “recommendations to decline” falls into three main categories, according to the agency. The first arises when the applicant’s repayment capacity is not demonstrated, in other words when “the applicant does not have adequate funds to repay the loan each month”, it said.

The second refusal reason arises when projected monthly repayments exceed the allowable percentage of monthly net income (maximum 35 per cent) under the scheme’s credit policy.

Credit assessment

The other reason is related to “an unsatisfactory credit history” when an applicant’s previous credit was not repaid in accordance with its agreed/contracted repayment schedule.

“Applications for the local authority home loan are assessed in line with the regulations establishing the scheme and the credit policy that underpins the scheme. The Housing Agency performs a centralised credit assessment of loan applications and issues recommendations to the local authorities, who make the final decision,” said the agency.

The Local Authority Home Loan came into play this year following on from the Rebuilding Ireland Home Loan and is the latest iteration of Government-backed mortgage lending. The new scheme is part of the Government’s Housing for All plan, aimed primarily to further support access to homeownership for “creditworthy homebuyers who otherwise find it difficult to access sufficient finance”. Local authorities will have €250 million to lend through the scheme for 2022.

Cork County Council received the most applications this year (144) followed by Dublin City Council (117), South Dublin (88), Louth (85) and Fingal (84). The urban areas received the most applications and are understood to have recorded the biggest rejection rates on account of the relatively high prices for homes.

House price growth slowed for the second straight month in May amid signs that the market may be cooling in the face of higher living costs. The figures for June are due to be published later today.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times