Just 33 affordable mortgages drawn down in Dublin city

Just 33 affordable mortgages have been drawn down in Dublin city since the Rebuilding Ireland Home Loan scheme was launched last February, new figures show.

The loan scheme allows putative homebuyers to avoid Central Bank loan restrictions and lock in to low-cost interest rates of as low as 2 per cent by applying for a home loan with their local authority, and is part of the Government's three-pronged approach to make homes more affordable, which also includes rental and purchase schemes.

According to Dublin City Council, 33 loans, worth €7 million, or an average loan of €212,840, have been drawn down by the end of September. Given a deposit of 10 per cent, this would indicate an average purchase price of €236,488 for users of the scheme in Dublin city.

The council reported that 345 applications had been received by the end of that month, and of these, 225, or 65 per cent, have been approved, indicating a rejection rate of just 35 per cent.

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This is a higher approval rate than other councils have reported, with figures from the Department of Housing indicating a rejection rate of 61 per cent, with 2,933 applications received since last February, and just 1,134 approved. Not all loans that have been approved will be drawn down. It is the role of the credit committee at each local authority to make the final decision on applications for loans.

Mortgage protection

One of the challenges of the scheme has been the requirement to take out mortgage protection through the council to which the homebuyer is applying.

Applicants to the Rebuilding Ireland Home Loan scheme, as with all local authority funding, must also apply for mortgage protection insurance through the Local Authority Group Scheme with a fixed provider at a group rate. It applies at a rate of 0.555 per cent on the outstanding capital loan balance. So for example, someone applying for the top rate of the affordable loan, of €288,000, will have to pay €133.20 each month for the loan. This can affect applicants’ ability to qualify for the loan, as it substantially increases the amount of mortgage protection they must pay each month. The mortgage protection offered through the councils is also substantially more expensive than that available through other providers.

Minister for Housing Eoghan Murphy has said that the home loan scheme is under review to examine certain "inconsistencies".