With new mortgage approvals falling over 40% in the first month of the Government -imposed lock-down, you may be wondering what does this mean for you? Whether you have an existing mortgage approval (aka Approval in Principal) or you were just about to apply prior to the pandemic… you probably have a lot of questions.
Brian Hayes, Chief Executive, BPFI said: “As expected we have seen a significant drop off in activity in the mortgage market in April as the medium-term impact of COVID-19 takes effect. And in the current conditions, it is likely that we will see a similar fall in mortgage drawdowns for this quarter as they follow the downward trend shown in today figures”.
First time buyers (FTB) accounted for a significant 47% of the 2,200 luckily approved mortgages in April. Mr Hayes said on the matter that:
“It is equally important to note today that despite the challenges during these unprecedented times, both economically and due to physical restrictions, 2,200 mortgages to the value of €525 million were approved by lenders here during April. This highlights the fact that lenders are continuing to approve new applications and that would-be borrowers should actively proceed with mortgage applications where income and employment circumstances have not been impacted by the current pandemic and where they meet the normal lending criteria”.
So what does the BFI suggest for Approvals in Principal?
Firstly, it’s good news. Your existing mortgage approval is not affected despite the uninspiring approval rates reflected in April. However, you should be expecting a formal Letter of Offer followed by draw-down of the mortgage. At this stage, you should acknowledge that your circumstances haven’t changed since lock-down and that you will be able to meet paybacks. The Consumer Protection Code requires lenders to ensure borrowers are able to afford the loans they take out. This means your lender may ask you for additional documentation to prove your financial situation.
If your situation has changed since receiving your Approval in Principal, this will need to be noted with your lender. At this point, a review will be completed to determine whether or not you can still afford to draw down your loan. This is all for your own good though so don’t worry!
If your situation hasn’t drastically changed since Covid-19, your lender may allow you to apply for an extension on your existing mortgage approval. Usually this is no more than 3-6 months. After this period your lender may request updated documentation.
If your Letter of Offer expires during the pandemic and you no longer wish to go ahead with your property purchase, you can apply for a refresh of approval once you decide to move forward with the mortgage procedure again. You will be asked to update your employment and income.
So your all set and want to apply for a mortgage, but, is it possible right now?
The answer is yes! You are completely able to apply for a mortgage right now. While data released by the BFI might feel a little intimidating, lenders continue to operate the mortgage application and approval process at the best their circumstances offer at this time.
As long as you are providing all necessary documentation as part of the application process lenders are continuing to work and will notify you of their decision in a timely matter.
As noted by the CEO of BFI:
“Looking ahead, there is no doubt that the period ahead will remain challenging for the mortgage market and the housing market as a whole as the current economic uncertainty continues. And during this period it will be necessary for both lenders and borrowers to take a realistic and pragmatic approach given the change in individuals’ financial and employment circumstances”.
So if your feeling prepared, secure and brave enough, get your applications in! If not, like many of us, take this time to get back on your feet and be reassured knowing lenders aren’t going away anytime soon. You will be holding the keys to your new home before you know it 🏡