Sunday 20 August 2017

Central Bank rules will leave thousands stuck in a 'rent jail'

Almost half of those likely to take out a mortgage in the next three years will struggle to meet the mortgage requirements
Almost half of those likely to take out a mortgage in the next three years will struggle to meet the mortgage requirements
Charlie Weston

Charlie Weston

As many as 12,000 people will be locked out of the housing market because of new Central Bank rules on mortgage deposits, a survey shows.

The research found that almost half of those likely to take out a mortgage in the next three years will struggle to meet the mortgage requirements, and will instead be left lingering in "rent jail".

Another 43pc feel negatively impacted by the new maximum lending limits.

The research was carried out on 1,000 people by Coyne Research and commissioned for mortgage software provider Mortgage Brain Ireland, and seen by the Irish Independent.

Chairman of the software company, mortgage broker Michael Dowling, said the results indicated that 12,000 potential first-time buyers would be forced to rent.

"This represents 12,000 first-time mortgage seekers who will be trapped into rental payments of almost €70m annually."

And this comes at a time when rents are increasing by a national average of 8.2pc.

This cumulate rent could amount to €420m after only three years, Mr Dowling said.

In February the Central Bank ordered lenders to ensure that borrowers had a deposit of 20pc for amounts being borrowed over €220,000. Borrowers are also limited to three-and-a-half times their income.

Mr Dowling said: "These unwelcome rules will hinder rather than help new house seekers." He said the implications of the new rules were that a couple trying to buy a house worth €300,000 will need a deposit of €38,000 and a joint income of €75,000.

"This is putting the prospect of home ownership in the hands of the privileged few professionals," he added. There needed to be a more equitable way to solve the issue.

"Otherwise many couples will find themselves condemned to rent for the next three to five years until they have saved the deposit and then be earning sufficient income to qualify for a mortgage."

Meanwhile, a separate survey from investment firm Standard Life found that parents and grandparents are worried about the ability of their children and grandchildren to buy a home.The parents want to help them accumulate the deposit to buy the first house, the survey of 1,000 people, commissioned by the investment firm, found.

Irish Independent

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