Thursday 21 September 2017

People divided on the Central Bank’s mortgage deposit rules

Patrick Honohan
Patrick Honohan
Jerome Reilly

Jerome Reilly

The people are divided over the Central Bank's tough new mortgage deposit rules. A small majority, 33pc, see the clampdown, designed to stop a property bubble and foster more responsible borrowing, as a positive development.

That's two percentage points above those who do not agree with the new rules (31pc) in the Sunday Independent/Millward Brown opinion poll.

In the poll 16pc responded: "It depends" when asked if the minimum deposit scheme was a positive development and 19pc "Didn't know".

Last Friday night at the Trinity Economic Forum in Dublin, Central Bank Governor Prof Patrick Honohan further explained his decision to allow first-time buyers some relief in the new mortgage deposit rules by saying they represent a "safer prospect" for lenders than other buyers.

"They don't default as much," he said.

Prof Honohan said research that showed this to be the case allowed the Central Bank to be "much more comfortable" in making the decision to give relief to first-time buyers.

Last week, the Sunday Independent revealed that credit unions are planning to give cash loans to parents who want to help their adult children meet the Central Bank's deposit rules.

First-time buyers who want to buy a home priced at €350,000 now need a €48,000 upfront cash deposit to get a mortgage under the new regime.

Yesterday, a special internal committee headed up by former Postbank boss Margaret Sweeney which has separately been investigating a move by the Credit Union into home loans since last September, presented its report to the ILCU board of directors at a meeting in Dublin. The report will now be assessed.

The development comes as hundreds of thousands of homeowners who are trapped in high-cost variable rate mortgages were given a small glimmer of hope.

Banks face the prospect of having to cut variable rates and pay compensation to homeowners. It follows a case taken to the Financial Services Ombudsman by a north county Dublin couple, Kenneth and Donna Millar.

The couple were disputing the move by their bank, Danske, to push up their variable rate mortgage to more than 4pc at a time when the European Central Bank rate is close to zero.

Ombudsman Bill Prasifka rejected their complaint but the case, after going through the High Court, has now gone to the Court of Appeal, which has reserved judgement. If the couple win, the case could impact on tens of thousands of variable rate mortgages.

Sunday Independent

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