Noonan wants Central Bank to review mortgage caps for first-time buyers
Finance Minister Michael Noonan wants the Central Bank to review the recently introduced caps on mortgages for first-time buyers because of a shortage of starter homes in Dublin.
Mr Noonan told RTE’s ‘Today with Sean O’Rourke’ that there are no starter homes being built in the capital at the moment. He said that was because young couples can’t raise the money for the homes.
“Anybody who goes around Dublin knows that any house building that goes on is middle-price houses, the starter homes are not being built.
“It’s not because [starter homes] are not needed, it’s because young couples can’t raise the money to fund it,” Mr Noonan said.
Mr Noonan said he thought the Bank had introduced the right caps at the time, but that circumstances have changed.
Most new mortgages require borrowers to stump up a 20pc deposit, but reliefs for first-time buyers were built in.
On homes worth less than €220,000, first-time buyers are required to provide a 10pc deposit.
On homes worth more than that, they are required to pay a 10pc deposit for the first €220,000 and a 20pc deposit thereafter.
In addition, people are only allowed to borrow 3.5 times their income as a mortgage. Mr Noonan said that element could be “tweaked”.
“There is no particular conflict with the Central Bank, and there never was...I know that the Central Bank is collecting data already on how the prudential rules are working and they constantly review, so they’re committed to a review,” he said.
“All I’m signalling is that among the other initiatives the Government might take, I would like if there was a review of that particular point.”
Mr Noonan acknowledged that the Bank had been right to set the caps at current levels - in January - saying house prices were going up quickly and there was a risk that the property market could overheat.
He also signalled the possibility of introducing punitive levies on banks that don’t reduce variable mortgage rates sufficiently.
He said allowing the Central Bank to determine what the rate would be would “kill the market”.
“I’m not disposed to that, we waved sticks around alright over the summer but the point was to get the variable interest rate down, to get another series of products on offer. I’d like if it went lower but there are peculiarities in the Irish mor5tgage business to do with legacy debt.
“I’ve another stick as well, I can put heavy levies on, I might go the levy route. I’m holding my fire on that for the Budget.”
He said he would like to serve as Minister for Finance again if Fine Gael leads another Government after the upcoming general election.