Monday 19 August 2019

'Loosen mortgage lending rules' - Varadkar calls on Central Bank to help couples caught in 'rent trap'

Taoiseach Leo Varadkar. Photo: REUTERS
Taoiseach Leo Varadkar. Photo: REUTERS

Political Correspondent

Taoiseach Leo Varadkar has called on the Central Bank to loosen strict mortgage-lending rules to help young couples caught in the so-called 'rent trap'.

In comments that could put him on a collision course with the independent regulator Mr Varadkar said he found aspects of the mortgage lending rules “very tough” citing situations where couples are trying to save for a deposit but have to pay as much €2,000 in rent.

“I do think one aspect of mortgage rules that is very tough is that you are expected to show you are saving at the same time you are renting, but of course if you didn’t have to pay a rent of €2000 a month you would be able to save,” Mr Varadkar said.

“I know the Central Bank is independent, I know it’s going to look at these things but as supply increases I hope that they would consider changes in that area so that people can get out of that rent trap and be able to buy.”

Lending limits were introduced by the Central Bank in 2015 and are mandatory for all mortgage lenders. Under the rules banks and mortgage providers are limited to lending three-and-a-half times a buyer’s income.

First-time buyers having to come up with a deposit that represents 10pc of the property’s value. Second and subsequent buyers have to have a 20pc deposit. However, around a fifth of borrowers were able to get an exemption from the rules last year.

Mr Varadkar said that he had bought his home in his mid-20s using a 100 per cent mortgage that was available from banks at the time, but acknowledged “that is now very difficult for people”.

He said: “We have a lot of people who are now paying more in rent than they would pay for their mortgage. There is a real mismatch there. House prices still 20pc lower than they were 12 years ago and they are levelling of, they are even falling a bit in Dublin but rents are at record highs.

“We have people who are now really stuck in a rent trap where they could well afford a mortgage, they can’t find a property because they are not available, because of lack of supply and that is being dealt with or they get caught by the mortgage rules.”

Mr Varadkar also predicted that the numbers of people in emergency accommodation would start to fall, while acknowledging that the over 10,000 people registered as homeless was “an appalling situation, and something that no government can stand over”.

“I am hopeful that we’re now at that point where we are going to see the numbers of people in emergency accommodation starting to fall month on month now,” he said.

He also defended Housing Minister Eoghan Murphy arguing that putting one of his most experienced ministers, Ricahrd Bruton, into that department would not have caused more houses to be built.

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