Friday 30 September 2016

Little on offer for first-time buyers - apart from some vague promises

Published 20/07/2016 | 02:30

The new housing strategy, called ‘Rebuilding Ireland’, contains just one paragraph on first-time buyers Stock Photo: PA
The new housing strategy, called ‘Rebuilding Ireland’, contains just one paragraph on first-time buyers Stock Photo: PA

Aspiring home buyers hoping to see concrete proposals from the Government to help them get a set of front-door keys have been let down.

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The new housing strategy, called 'Rebuilding Ireland', contains just one paragraph on first-time buyers.

And significantly, there is little or no detail in that one paragraph. Certainly nothing that would ease the worry and help the financial situation of those limbering up to buy a new home.

Despite the spin put out in the past few days, it seems that first-time buyers will have to wait a while before anything is forthcoming to help give them a foothold on the housing ladder.

That is because the housing strategy contains vague comments about recognising the difficulties faced by first-time buyers in securing a mortgage. This is mainly due to the requirement to have a large deposit, courtesy of the Central Bank lending rules.

This has given rise to a situation where the average first-time buyer in the Dublin region is now coming up with a €50,000 deposit when they get a mortgage. This is a crazy situation in a nation that values home ownership.

Expectations were raised that a scheme was on the way, but the 'Rebuilding Ireland' document makes nebulous references to the Government working with the Central Bank, as part of its review of its mortgage lending limits, to develop a new "help-to-buy" scheme.

This, the document states, is to ensure the availability of adequate, affordable mortgage finance, or mortgage insurance for new buyers.

More details will be announced in Budget 2017, we are told. And that is it.

The reference to mortgage insurance indicates that little, if anything, has been decided. Mortgage insurance is used in some jurisdictions to allow banks accept deposits of less than 20pc without increasing the risk of the loan. The product allows a bank to insure against a fall in the value of a property, typically 20pc, reducing the prudential risk faced by the bank.

This insurance idea has been raised before but was rejected by the Central Bank.

The fact that the Government says it is working with the Central Bank on financing or a mortgage insurance product shows that little or nothing has been agreed for first-time buyers, despite 'Rebuilding Ireland' being three months in the making.

Then there is the not inconsiderable problem of one arm of the State coming up with a funding plan for first-time buyers (the Government) that directly neutralises measures put in place by another arm of the State (the independent Central Bank). That probably explains the lack of detail in the document.

The Government has stressed that any first-time buyer measures will be announced in the Budget. Housing Minister Simon Coveney said any initiatives will be "back-dated" to now so there is "no need to stall".

The minister said that you can't expect first-time buyers to "magic up a mortgage".

Mr Coveney said that Finance Minister Michael Noonan "will design and decide" on the package to be announced in October.

It is all rather vague.

As far as potential first-time buyers are concerned, there is much spade work to be done before something solid emerges.

Irish Independent

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