My partner and I are looking into the possibility of moving to Ireland from the UK. I came across an article you wrote last year about a lady looking to move back to Ireland from Canada and I was wondering if you had any advice on getting a mortgage in Ireland while living in the UK.
I’m from the UK and my partner is from Ireland. We lived over there for a short while (10 months) six years ago. We have a mortgage on a house we own in the UK and ideally what I would like to do is take some money out of that house and use it as a deposit on a house in Ireland for us to move into.
My partner is on maternity pay that is due to finish soon and I work full time. I have a job offer from a company in Ireland. The only thing holding us back is the living arrangements.
Mr GB, UK
Irish banks are great at telling everyone that they are open for business. Most are running active marketing campaigns on the subject. Several letters sitting on my desk regarding setting up new accounts and switching mortgages would suggest otherwise.
The truth is that banks are as, if not more, nervous of the cost-of-living squeeze and rising interest rates as anyone else. The fallout from the reckless lending ahead of the financial crash 14 years ago remains fresh in the mind. Banks are still dealing with customers unable to service their loans — at least those that they have not yet managed to offload at a significant loss to specialist funds. Restrictions on pay and bonuses — a bone of contention in the Irish banking sector — are still in place even at those banks that have formally repaid all bailout funds they received from the State.
All of which is to say that Irish banks are more risk averse now than they have been in living memory. They have not actually pulled mortgage lending products as some UK banks did following the disastrous recent mini-budget from chancellor Kwasi Kwarteng but applicants will recount ever more restrictive access to home loans, especially at nonbank lenders and a tightening of the rules all round.
The first thing is to figure out what mortgage product you are looking for. Are you looking for an expat loan, a mortgage to buy a property in Ireland before you move here, or a more normal mortgage product once you actually move to the State?
From your letter, you look to be in the market for an expat mortgage, securing the loan before you arrive in Ireland so you can purchase a property to move into on your arrival.
Two of the banks that purported to be in the business of expat lending — Ulster Bank and KBC — are themselves shuttering their Irish businesses so that takes them out of the picture. And Bank of Ireland, the biggest domestic bank, got out of the expat mortgage market a few years ago.
That effectively leaves AIB and Permanent TSB, and I gather Permanent TSB deals only with applications from euro zone countries so that also rules you out in the sterling zone. So it appears you are down to a choice of one.
You might consider whether you would be better off waiting until you arrive in Ireland to apply as a resident for a mortgage. Why?
First up, it appears you will need a bigger deposit if you are applying for an expat mortgage — up to 35 per cent. Then there is the interest rate. It is possible you will be charged a higher mortgage interest rate in line with those applying on buy to let / investment loans. That will make a noticeable difference to your payments.
Sure, you could switch to an owner-occupier rate down the line but then you are contending with the ongoing risk of rising interest rates.
It is also possible that, in assessing your ability to service an Irish expat loan, the lender will take into consideration the cost of both the Irish mortgage and the mortgage on your existing home in the UK. And they may not take into account any rent you are receiving on the property. They certainly won’t be too interested in whether you lived here before for such a short time, in terms of giving you any benefit on the credit side of the ledger.
And then there is the stress-testing exercise now common with all homeloans. In the current ECB interest rate environment, where rates are rising by up to three-quarters of a percentage point at successive ECB meetings, it is hardly surprising that lenders appear to be stress testing above the two percentage point margin on prevailing variable mortgage rates that used to apply. In addition, I understand there will also be a separate stress-test exercise done of the sterling/euro exchange rate to see what impact a fairly substantial adverse swing would have on your income in euro terms.
All in all, this makes an expat mortgage both expensive to service and harder to access on income grounds.
If you are looking to pursue an expat mortgage, it might be advisable to go through a broker, if only because they are more familiar with this niche product and may be better able to present your case in the most positive light, knowing what the lender(s) are looking for.
I don’t have any personal experience of brokers operating in the expat mortgage field but I gather they include mortgage123.ie and a group based in Waterford called Topmortgages.ie.
The alternative is to wait until you arrive in Ireland and apply then for a standard resident mortgage.
The obvious downside here is that you will have to rent for an initial period while you source a mortgage at a time when the rental market in Ireland is both expensive and has very limited availability.
On top of this, lenders will not take the employment record or job promise of either you or your partner on trust. If you are arriving in Ireland starting a new job, it will be somewhere between six and 12 months before you will be allowed to draw down a home loan here. I am told you will be able to process the mortgage application within this time up to the drawdown point, though I would not even take that for granted.
Even if they were prepared to accommodate you through the mortgage approval process in the expectation of a future drawdown, banks here are overwhelmed trying to manage the significant transfer of customers from the departing Ulster Bank and KBC to the three surviving domestic operators.
Either way, that “probation period” will certainly stop you moving into your own home for some time. In turn, that will make it more difficult for sellers’ agents to see you as genuine interested parties in properties you may view and hope to buy.
And all the time, interest rates are rising. That is certainly expected to continue for the guts of the next year, and maybe longer.
On the upside, the deposit requirement will fall to 20 per cent on an Irish resident loan rather than the 35 per cent you will be expected to provide for expat borrowing. You will also be able to avail of more competitive owner-occupier mortgage rates and won’t have to face the currency element of the stress testing regime. That will make access to a loan easier and the cost of such a loan less expensive, assuming your job offers in line with expectations.
You might also be able to get credit for net rental income from your UK property against the mortgage outlay there, though I could not say for certain.
The bottom line is that there is no easy answer. The expat market is very limited and quite restrictive in what it will lend, and the alternative requires you to long figure your home purchase in Ireland unless you could fund it entirely from your own financial resources.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice
