Demand for mortgage exemptions expected to surge this year
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APPLICATIONS for mortgage exceptions are expected to surge to record levels in January as lenders respond to pent-up demand from borrowers.
Exemptions to the strict Central Bank lending rules were paused for much of last year due to the uncertainty in the mortgage market brought on by Covid-19 pandemic.
Banks are allowed to issue a certain amount of mortgage exceptions to Central Bank lending rules every year.
These allow banks to lend more than three-and-a-half times a person’s income, or to allow second or subsequent buyers to buy a home with a deposit that is less than 20pc of the purchase price.
Getting an exemption is often popular for mortgage applicants seeking to buy urban homes, where prices often exceed these income limitations.
Mortgage approvals hit record high levels in November, when they were up 24pc compared with the same month in the previous year, as applicants who had delayed buying decisions entered the market.
This is expected to have a follow-on effect on the exceptions market, which re-opens this month.
Martina Hennessy, managing director of mortgage platform Doddl.ie, said she expects a sharp rise in the numbers seeking an exemption from the lending limits.
She advised mortgage applicants to have all their paperwork in place so that they can hit the ground running if applying for an exception.
“Last April, exceptions were paused by many lenders due to the uncertainty in the market from Covid-19, so many mortgage applicants have been holding out until now when the chance of an exception is stronger,” said Ms Hennessy.
“Exceptions run on a calendar-year basis so the large majority will be processed at the start of the year, meaning borrowers need to be prepared to hit the ground running by having up-to-date paperwork to back up their applications and avoid any potential delays.”
Banks can apply exceptions over Loan-to-Income (LTI) caps on up to 20pc of their mortgage business for first-time buyers and 10pc of second and subsequent buyer applications.
Asking prices surged to over 6pc last year, the fastest pace in almost three years, according to the latest report from MyHome.ie.
Dublin prices rose by 4.8pc. This is putting more pressure on buyers to seek out an exemption.
“As the proportion of exceptions granted by lenders increases, criteria around achieving exceptions can tighten for applicants as the year progresses,” warned Ms Hennessy.
She said buyers need to set a budget and understand what is achievable and affordable in relation to mortgages.
“Be aware of what is affordable in terms of repayments. Do not over-extend yourself and consider other future commitments such as childcare and other potentially large outgoings,” she said.