The mortgage brokers' representative body AIMA claims that notice periods applied by lenders on new higher rate offers are too restrictive and will jeopardise mortgage approval and house sales.
The Association of Irish Mortgage Advisors referenced Finance Ireland’s recent announcement that it will significantly increase its rate across its full range of mortgage products.
Just five days (later extended to 10 days) were allowed by Finance Ireland for existing mortgage applications to proceed to drawn-down stage and secure the original lower rates.
AIMA said that feedback from their members suggests that the vast majority of applicants were unable to meet this deadline, and that many borrowers may now be exposed to potentially having their mortgage application reassessed, at the new rates, to see if they still qualify based on affordability.
The mortgage experts say that this could ultimately result in the loss of deposits and house sales falling through.
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AIMA chairman Trevor Grant said that if lenders insist on giving insufficient notice, then thousands of would-be homeowners could see their purchase agreements fall through in the coming weeks.
Alternatively, it could force borrowers to take mortgages at an increased rate with no time to avail of cheaper options elsewhere - actions that are not in the best interest of consumers.
Grant added: “Moves by lenders of late to introduce rate increases are expected and understandable.
“But what is not expected are very narrow timeframes offered to consumers who are in the throes of the property purchase process and mortgage switching to avail of the lower rates which were originally offered.
“This situation could potentially be disastrous for the people affected. Mortgages invariably take months from first application to closing. However, thousands of people who are well advanced in the process are now being asked to close within a very short timeframe that is for most simply not possible.
“Many applicants will have signed contracts and paid potentially non-refundable deposits to purchase their new home. Equally, a number of those approved may not have sufficient time to organise alternative and more appropriately priced mortgages.”
AIMA is calling for a consistent notice period of eight weeks to complete the mortgage drawdown, for those applicants who are already approved for their mortgage.
“If an applicant has fully submitted all of the information required and has secured mortgage approval, they should be given a period of eight weeks to close out their mortgage at the rate applicable at the time of submission,” said Grant.
“Alternatively, new mortgage applicants should have the option to book a rate, where they pay a fee in advance of their application to secure the current interest rate deal. This could prove to be particularly attractive in the current climate of increasing interest rates.”
