Nevertheless, at least one bank has said it is allowing income multiples to increase from 2.5 times to three or 3.5 times a borrower's salary. The bank says that low interest rates, which are expected for the foreseeable future, mean that borrowers can more easily afford the repayments. Some building societies are also in favour of increasing the limits for those on a high salary. Irish Nationwide managing director, Mr Michael Fingleton, said he now supported a move to a net income criteria. However, Irish Permanent, the biggest mortgage lender, views these moves as "unwise".
The Office of the Revenue Commissioners has warned that it will be closely inspecting all home purchases entered into in April to ensure that none are evading new rules on taxation and stamp duty by backdating contracts.
Following the Government's implementation of the Bacon report on house prices, sources say that some investors have got around the system by simply backdating contracts.
This allows them to avoid stamp duty on new homes and apartments now being levied under the changes announced and allows rental income to be written off against mortgage interest, a relief which has now been ended.
The Revenue has told The Irish Times that anyone found guilty of doing this will face up to a five-year prison sentence and a fine of £10,000. There are also civil penalties and interest will be charged on the underpaid tax, the Revenue warned.
The Revenue will be conducting audits on properties signed for around the cut-off date of April 28th.
Property sources say that so many contracts are being backdated to avoid the new law that lenders have hardly noticed a slippage in loan approvals from investors. "The time machine has been reinvented," one source said. Meanwhile, the Central Bank has warned that it will take a serious view of any bank or building society which seeks to increase the amount it lends to mortgage borrowers.
Several banks and building societies have admitted that they are close to implementing a different lending criteria for mortgage borrowers.
None of the lenders have cleared the move with the Central Bank, which has agreed current rules with the institutions. The Bank is worried that any increase in the amount which banks lend out as a percentage of the borrower's salary could push the market over the top and eventually lead to repossessions, as happened in London in the late 1980s.
Nevertheless, at least one bank has said it is allowing income multiples to increase from 2.5 times to three or 3.5 times a borrower's salary. The bank says that low interest rates, which are expected for the foreseeable future, mean that borrowers can more easily afford the repayments. Some building societies are also in favour of increasing the limits for those on a high salary. Irish Nationwide managing director, Mr Michael Fingleton, said he now supported a move to a net income criteria. However, Irish Permanent, the biggest mortgage lender, views these moves as "unwise".
