Friday 9 December 2016

Cautious welcome for rule change amid fears of price increases

Published 24/11/2016 | 02:30

Michael McGrath cautiously welcomed the changes that will see first-time buyers being able to secure a mortgage with lower deposits, but said house prices will have to be 'very closely monitored'. Photo: Tom Burke
Michael McGrath cautiously welcomed the changes that will see first-time buyers being able to secure a mortgage with lower deposits, but said house prices will have to be 'very closely monitored'. Photo: Tom Burke

Fianna Fáil has warned of a "considerable risk" of house price inflation when the revised Central Bank mortgage rules are combined with the impact of the Government's help-to-buy scheme.

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The party's finance spokesman Michael McGrath cautiously welcomed the changes that will see first-time buyers being able to secure a mortgage with lower deposits, but said house prices will have to be "very closely monitored".

Sinn Féin, meanwhile, argued that the change has "torpedoed" the help-to-buy scheme, with Pearse Doherty saying it's been made "completely redundant". He called on the Government to scrap that plan and invest the €50m cost back into the housing crisis.

Welcoming the Central Bank's decision, Taoiseach Enda Kenny said it has "made it perfectly clear they will continue to monitor these conditions very carefully in the hope that they level the opportunity for people to be able to get on the housing ladder without walking over a cliff."

A statement on behalf of Housing Minister Simon Coveney said the rule change "aligns well" with the Government's action plan to tackle the housing crisis. His spokeswoman said it's a recognition of the challenges for first-time buyers in saving a deposit.

She said that along with the help-to-buy scheme, the changes will help provide certainty for the housing sector. It will have the effect of "bringing forward significant additional supply for the segment of the market that most needs it," Mr Coveney's statement added.

"I have genuine concerns about the combined impact and effect on the price of new homes of the new deposit rules and the Government's help-to-buy scheme."

Mr McGrath added that when both measures are combined, a deposit of just €20,000 will be needed for a property valued at €400,000. "With a very limited supply of new homes on the market at present, there is a considerable risk of further house price inflation," he said.

Labour's Joan Burton said the relaxation of the rules will help first-time buyers in Dublin and Cork, where prices are often above €220,000.

She said "problems still exist", pointing out it doesn't help those in negative equity who want to trade up and rent payments are still not taken into account in terms of a mortgage applicant's ability to afford the loan payments.

Irish Independent

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