Sunday 25 September 2016

Labour plans first-time buyers' saving accounts

Published 10/01/2016 | 02:30

Fianna Fail's finance spokesman Michael McGrath has proposed linking the ability to pay rent with the mortgage deposit rules Photo: Tom Burke
Fianna Fail's finance spokesman Michael McGrath has proposed linking the ability to pay rent with the mortgage deposit rules Photo: Tom Burke

The Labour Party is planning to establish post office savings accounts with high interest rates for first-time buyers struggling to save for a mortgage deposit due to the Central Bank's strict lending rules.

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The plan, which features in a draft version of Labour's election manifesto, comes after the newly appointed Central Bank Governor Philip Lane ruled out reviewing the regulator's restrictive mortgage rules until later this year.

The Central Bank's rules are now set to become a key election issue in the coming weeks, with thousands of young people struggling to get their foot on the property ladder.

Politicians are being regularly faced by angry young parents stuck in rent traps because mortgage rules mean they are required to save up to 20pc of a mortgage deposit to buy their first home.

Candidates are also facing backlash from families who bought starter homes but are now struggling to trade up because of the Central Bank's rules.

Labour's manifesto is understood to say that the Central Bank rules have been effective at a macro level but it recognises that they are a burden for first-time buyers.

The party's proposal for a high-interest-rate post office saving account is being drafted as a sop to both first-time buyers and post worker unions.

Details of how the account will be operated or funded are still unclear, as the proposal is at a draft stage.

"It's a proposal being considered and the manifesto hasn't been signed off on yet so at this stage it is only a proposal being considered," a Labour spokesman said.

Meanwhile, Fianna Fail's finance spokesman Michael McGrath has proposed linking the ability to pay rent with the mortgage deposit rules.

Mr McGrath wants the Central Bank to allow renters to make up 25pc of the deposit requirement by taking into account rent payments they have made over the previous three years. Under the plan, a deposit requirement of €20,000 could be reduced by €5,000.

Mr McGrath said his plan will open home ownership to a cohort of people who have proven their ability to meet a monthly mortgage but are "effectively shut out of the market at present because of the deposit rules".

Tanasite Joan Burton has previously expressed support for linking ability to pay rent with the Central Bank rules.

It is unclear if Fine Gael will offer first-time buyers anything in the party's election manifesto.

A spokesman said the party is "conscious" of the impact of the Central Bank's mortgage lending rules for first-time buyers, which will be addressed by increasing housing supply.

Sinn Fein said it has always supported the Central Bank rules, as they "curb astronomical house prices".

Sunday Independent

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