My wife and I were due to apply for a mortgage but as the pandemic struck we are of course unable to move.
Now the conundrum. I am temporarily laid off till such time as the business is back up and running. I work in hospitality. Luckily my wife still earns her salary. The question is, when I do get back to work, will the banks still assess my salary for the duration at work or will they reject on the grounds that I did not earn enough in the preceding months?
I feel this will be unfair assessment on the bank’s behalf and hope you can take my case as a test to ascertain what will happen. We have a property which we can close on only if my wages can be taken into account.
Mr RL, email
This is where the current economic disruption from the coronavirus pandemic gets personal. Authorities and individuals are still grappling with stemming the health crisis but even they are now beginning to look at the practicalities of trying to restart general economic activity after the May bank holiday if current progress is maintained.
And the same is true for individuals, many of whom have had their lives disrupted in the most dramatic fashion – even if they have not come in direct contact with the virus.
The figures are horrifying. In the past few weeks, more than 500,000 people have applied for the special pandemic unemployment payment of €350 a week. That's over 20 per cent of the workforce who, just a few weeks ago, were secure in relatively stable jobs but find themselves suddenly out of work as a result of the virus and Government shutdown of non-essential business.
And that doesn’t even include those working who are over the age of 66 or under 18, who cannot apply for the payment.
The banks are only now beginning to adapt to the new realities – under some pressure from Government it must be said. Having had their chief executives hauled in by the Minister for Finance, it does appear that a certain sense of reality has taken hold among bankers about the sheer impossibility of continuing a business as usual on loan repayments and standard practices on default in our current extraordinary situation.
But that is only for existing loans? What about future lending to people in your position?
Banks are innately cautious – all the more so since getting burnt in the last financial crisis. Most loan applications these days are run through automated processes rather than human eye in the first instance. And those processes are designed specifically to highlight areas of concern for the banks – such as periods of unemployment.
With banks scrambling to manage loan defaults just now, I imagine they have yet to get their head around lending practices post-crisis or how to deal with people who are good credit risks but who have found themselves caught up in the Covid shutdown.
Ultimately, allowance will be made. It’ll have to be or the housing market will simply shut down. But, instinct tells me this is something that you and others in your position will have to press with the lenders.
The good news is that you were clearly in a good position to borrow before the shutdown. So, for you, the issue is preserving as much of that advantage as possible in more straitened times.
Prepare your application now in advance, while you have time on your hands, concentrating on gathering financial records that show your good financial habits and repayment capacity – as well as providing explanations for this and any other setback in recent years that might cause concern.
Meanwhile, try, if you can, to preserve any deposit that you have built up to date to qualify for a mortgage under Central Bank rules. With the loss of a salary, this is no easy ask but lack of a deposit will be an easy out for banks – and, in my view, they will also be more picky about exceptions to Central Bank rules for people in your position when things return to some degree of normality.
The first priority for you, obviously, when things return to some degree of normality is to get back into employment – either with your former employer or elsewhere. The concern is that, even when business starts to reopen, how quickly the hospitality sector in particular can recover.
The only good news is that, with the property market essentially shut down just now, at least the property you have identified will likely still be available at that time – and the sellers might even be more open to negotiation as there is an expectation that prices could drop as sellers’ need for cash kicks in.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email firstname.lastname@example.org. This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.