Deferred mortgages are being offered to first-time buyers and homeowners to kick-start the housing market. More than 100 properties are being offered under the pilot scheme, launched by the National Asset Management Agency (Nama).
The residential mortgage 80:20 Deferred Payment Initiative will see 80% of the agreed sale price of the property paid upfront, with the remaining 20% due after five years, depending on an independent assessment of the property’s value.
It will be available to buyers who can secure mortgage approval but not investors.
Brendan McDonagh, Nama chief executive, said concern about potential decreases in house prices in the future is a significant factor for house buyers in the market.
“We are piloting this initiative to allow some buyers, who are putting off their purchase in the expectation that prices may fall further, to buy now with the knowledge that they may not lose out even if the value of their home falls by up to 20% over the next five years,” he said.
“Together with initiatives introduced in the recent budget, we believe that this measure will help encourage greater activity in the housing market.” Bank of Ireland and AIB, through its subsidiary EBS, and Permanent tsb, will be providing mortgages of up to 70%.
At least 10% must come from the buyer. The pilot phase includes more than 115 houses in 12 developments in the Naul, Co Dublin; Dublin 18 and 22; Dunshaughlin, Co Meath; and Carrigtwohill, Ballincollig, Crosshaven, Rochestown, Douglas and Cobh in Co Cork.
If successful, payment deferrals may eventually be offered on 750 properties nationwide.
Permanent tsb said it will advance mortgages with a variable rate of 3.69% and will ensure that even if prices do not fall after five years, the customer will not face increased repayments at that time.
Niall O’Grady, head of marketing with the lender, said: “This is a very constructive initiative which will address the concerns of some borrowers that they might be at a loss if prices fall further.
“By protecting those buyers from falls of up to 20%, Nama is tackling one of the key reasons people cite for putting off their purchase decision.”
Jim O’Keeffe, AIB head of mortgages, said the bank will fully support the pilot initiative which is available through EBS branches.
“We are continuing to see strong growth in our new mortgage business, with AIB sanctions in March at their highest level in over 18 months,” he added.
“AIB is open for business and supporting this initiative is another step in demonstrating our commitment to our customers and the market.”