Strict new home-loan rules will benefit landlords over first-time buyers - banks
NEW Central Bank rules are more favourable to investors than to people hoping to buy a home, the banks have told a leading international credit ratings agency.
The lending restrictions will push up rents, ratings agency Moody's said in a new report on Irish banks.
The rules on deposits for those buying a home also put limits on the amount of income that can be used to calculate how much can be borrowed.
However, they will also act to cool down the property market, as they will stop first-time buyers over-stretching themselves.
It comes as a separate report from estate agency DNG shows property prices in Dublin rose by just 0.4pc in the first three months of this year.
Moody's said it expects house prices to rise by between 5pc and 10pc this year, due to a stronger economy and the numbers of young people moving out from their parents' homes.
The report is based on interaction between Moody's and the banks.
Rents will be pushed up and young people will end up renting for longer.
"Lenders find the rules are more favourable for those buying properties with a view to renting them out," Moody's Gaby Trinkaus concluded.
Under the restrictions that came in last February, most property buyers will have to have a deposit of at least 20pc of the value of the property.
And buyers will be restricted to borrowing no more than three-and-a-half times their income. This will curb any bubble developing, the credit ratings agency said, after surveying seven mortgage lenders in this market.
But first-time buyers are to lose out, it warned.
"Lenders consider that the higher deposit requirement will see first-time buyers renting for longer, and increase rents," the report says.
This will be positive for landlords, as rising rents will mean buy-to-let investors will be able to keep paying their investment mortgages on time.
But overall the mortgage lending restrictions will stabilise the property market in the long run, Ms Trinkaus wrote.
Meanwhile, estate agency DNG said the lending limits and the end of tax relief for property investors meant there was a modest rise in property prices in the first three months of this year. Price rose by 0.4pc in the first three months of the year. On an annual basis, prices were up 14.4pc.
The average price of a resale property in Dublin remained relatively unchanged in the quarter and now stands at €375,630, compared with €373,981 at the end of last year.
House prices have now risen by 55pc since the 2012 low point, but still remain 47pc below their peak levels.
DNG chief executive Keith Lowe said the Central Bank acted too quickly in bringing in the lending limits, as the market is not yet overheating.