Applications for mortgage exceptions are expected to surge to record levels this month as lenders respond to pent-up demand from borrowers, according to a mortgage expert.
Paused for most of 2020 due to Covid-19 uncertainty, 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 3.5 times a person’s income or to allow second or subsequent buyers to buy a home with a deposit that is less than 20% of the purchase price.
They are 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, up 24% on 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 reopens this month.
Martina Hennessy, managing director of mortgage platform Doddl, said the majority of applications will be processed at the start of the year.
“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,” she said.
“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 20% of their mortgage business for first time buyers and 10% of second and subsequent buyer applications.
“As the proportion of exceptions granted by lenders increases, criteria around achieving exceptions can tighten for applicants as the year progresses,” Ms Hennessy warned .
“Setting your budget and understanding what is achievable and affordable in relation to mortgages is still important.
“Be aware of what is affordable in terms of repayments. Do not overextend yourself and consider other future commitments such as childcare and other potentially large outgoings.
“This is where a mortgage broker can really help you. As well as setting realistic expectations they understand what lenders offer the best options for your requirements and their different credit and exceptions policies.”
