A.E.M.A.

20pc mortgage deposits may be too high - AIB chief

The 20% mortgage deposits needed under new Central Bank rules may prove to be too high, AIB chief executive David Duffy has warned

The Central Banks wants the amount that banks can loan home buyers capped at 80pc of the value of the property.

Mr Duffy supports the Central Bank's idea in principle but said "we need to be sure we don't trip up over any unintended consequences". There is concern that first-time buyers will be unable to save the 20pc needed - which would translate as a €60,000 deposit for a €300,000 house.

It comes as a new survey has found a lack of financial knowledge among consumers with many not realising that the main banks are open for mortgage business.

The survey, carried out by Amarach Research for the Association of Expert Mortgage Advisers, found that half of people did not know that their financial interactions were recorded by banks. And how they deal with these transactions, such as credit card and loan repayments, impact on their credit rating.

Banks use credit ratings to decide whether a customer is eligible for a mortgage. The mortgage advisers' group said the results of the survey showed a "startling lack of knowledge" among consumers about what was needed to get a mortgage.

Only four out of 10 adults claim to know their credit history. Smaller numbers know how to access it.

Awareness that banks are open for mortgage business remains low, despite a pick-up in property prices, the survey found. AIB, Bank of Ireland, Ulster Bank, Permanent TSB, EBS and KBC Bank are competing for first-time buyer business, although their mortgage rates for new buyers have been repeatedly criticised as being too high.

Meanwhile, Mr Duffy confirmed yesterday that AIB was looking at sending a submission to the Central Bank on the controversial new 20pc deposit rule for mortgages.

"I think the rate (the 20pc deposit) might be a little bit high to start with," he said. His comments echo those of Bank of Ireland boss Richie Boucher, who said capping loans at 80pc would lead borrowers to seek other sources of risky funding to make up the difference.