A RADICAL plan to allow first-time buyers to purchase new houses with a mortgage financed by the State is set to be unveiled in the Budget, the Irish Independent has learned.
The move would allow new buyers who are struggling to meet strict conditions imposed by banks and building societies being able to borrow up to €300,000 from the Government.
Mortgage brokers have been approached and asked if they would be willing to arrange the State-provided home loans. Sources indicated that the brokers would be paid a set fee, thought to be around €1,000, for arranging the mortgages.
The new scheme, to be announced in next Tuesday's Budget, will be restricted to the purchase of new homes only, which is likely to lead to criticism it will end up giving developers a dig-out.
Critics will argue the scheme could have the effect of stopping house prices falling further to their market-adjusted level.
Since the demise of 100pc mortgages, most lenders are now demanding deposits of up to 20pc before approving a mortgage. This means first-time buyers are having to come up with deposits of between €30,000 and €60,000.
Under the new scheme, which has been designed by the Department of the Environment and Local Government, with input from the State's Housing Finance Agency, funding would be provided for those refused a loan and who do not earn more than €60,000.
The Housing Finance Agency raises money for local authorities to use to support housing projects. Affordable housing schemes have run into major difficulties, with developers withdrawing from the programmes claiming they cannot make money.
Up to now, local authority loans had a maximum loan approval of just €185,000. The new scheme will expand the maximum loan approval to €300,000.
Neither the Department of Finance or the Department of Environment, Heritage and Local Government would comment last night.