New rules to drive up house prices: AIB boss
Mortgage changes will lead to 'justified' surge in cost of property, warns banker
Changes to mortgage lending rules are likely to spur price increases in the market for entry-level homes, the head of AIB has predicted.
The bank's chief executive, Bernard Byrne, said rising prices would have a positive impact because it would encourage construction.
Mr Byrne was speaking at the Oireachtas Finance Committee, where he said the move introduced by Central Bank Governor Philip Lane would have a positive impact on the market.
"One of the comments from construction was prices were too low to justify development of new builds," he said.
"I think there's an element of pricing for first-time buyers that will have to rise in order to attract supply into the marketplace."
From the start of next year, first-time buyers will be able to qualify for a mortgage with a 10pc deposit, if they meet other criteria.
At the moment, new buyers need a 20pc deposit for any amounts borrowed over €220,000.
But there are warnings that the alterations will send property prices up.
Experts have said mortgage borrowing could shoot up by 25pc next year.
Economist and banking analyst with Investec Bank, Philip O'Sullivan, is now forecasting mortgage lending next year of €7bn.
This is up from around €5.5bn this year.
Davy Stockbrokers analyst Conall Mac Coille also said he expects the relaxation of the lending limits to push up property prices and increase mortgage lending.
The Government announced a help-to-buy scheme in last month's Budget.
But figures that were released by Daft.ie show that there are just 2,540 properties on the market nationwide that qualify.
Dublin has 643 newly- constructed homes that will qualify for the Government's help-to-buy initiative.