Banks seeking to artificially inflate house prices

national | housing | other press Wednesday September 09, 2009 11:22 by Stoph

From Respond! Housing Association

Respond! spokesperson Aoife Walsh asserts that many buyers are unable to access mortgage finance as it is not in the interests of the banks to lend to those seeking mortgages less than €150,000.

Banks seeking to artificially inflate house prices
19 Aug 2009
Respond! News
Ireland’s largest housing charity fears that Irish banks may be distorting the property market. Respond! Housing Association is concerned that some banks are not lending below certain levels in order to maintain higher house prices. The effect of this policy is that house prices are remaining artificially high which is important for banks prior to the assessment of house and land prices by the National Asset Management Agency (NAMA).

Respond! spokesperson Aoife Walsh asserts that many buyers are unable to access mortgage finance as it is not in the interests of the banks to lend to those seeking mortgages less than €150,000.
“It was recently reported in the media that some young people seeking mortgages for €150,000 were being refused on the grounds that banks are now operating a minimum mortgage amount. Considering the number of vacant properties currently in the country, this is a scandalous situation. Respond! has witnessed some strange banking decisions in relation to some of our own affordable properties whereby applicants who seem to fit the criteria perfectly are not able to access a mortgage of less than €130,000. This is in spite of having the adequate income. It is akin to the shopkeeper withholding goods in order to stimulate demand so that higher prices can be charged. We are calling on the Competition Authority to take note of these practices and protect the Irish Consumer.”

Respond! argues that banks should be lending to fully qualified applicants irrespective of the cost price of the house. Banks in receipt of the Government Guarantee should be making mortgage finance available to those with the ability to repay according to the housing charity. Given the number of vacant properties, banks should be facilitating potential homeowners and not hindering them. This is critical in order to boost the housing market and restore confidence once more.

“It seems clear to us that banks are trying to keep pricing levels elevated ahead of the establishment of NAMA” added Ms Walsh. “It is in their interest to keep house prices artificially high and this could result in NAMA paying too much for the bad loans the banks will be transferring to it. This does not represent value for money and once again it will be the Irish taxpayer who will be forced to pay for the actions of our banks. “

Respond! maintains the number of vacant properties in Ireland is set to rise in the future. With the number of repossession cases before the courts increasing every month, and with little information available on the suspected high level of voluntary home surrenders, the housing market could soon be flooded with even more empty properties. This is not good news for an already struggling property market says the housing charity.