'Only people on high incomes can afford to buy a home' - Central Bank Governor

(Stock photo)

Charlie Weston Personal Finance Editor

ONLY people on high incomes can now afford to buy a home, Central Bank Governor Philip Lane told TDs.

And the Central Bank boss said the Government’s help-to-buy tax rebate scheme is driving house prices up.

His comments to an Oireachtas Committee comes after housing reports from Daft.ie and MyHome.ie showed that house prices are now rising sharply.

Asked about the help-to-buy scheme, which many economists feel is creating too much demand for housing when supply is limited, he said it was pushing up prices.

“I don’t think there can be any doubt, if you have additional capacity to enter the system there is going to be impact effects, even though it only applies to new builds, it will of course drive up prices.”

He added that the scheme could have a short-term effect, and that the long-term effect of new houses and an increase in supply could ‘self-correct’ the market.

But he questioned whether the €20,000 grant to first-time buyers for buying new builds was the best way to fix the housing crisis.

“If you’re offering €20k rebate, is that the best use of that funding? But that’s for the Oireachtas to [decide].”

He said price rises were such now that only those with high incomes could afford to buy.

“Prices are going up to an extent that only people on high incomes can afford house prices,” he told the Oireachtas Finance Committee.

Mr Lane said it was important to remember that Central Bank lending rules meant buyers cannot get mortgage approval for more than 3.5 times their income level.

This would ensure consumers would not over-borrow to buy homes.