Tuesday 23 January 2018

House prices likely to rise on back of mortgage rules - AIB

Clamour for homes as stats show just 2,540 qualify for help-to-buy scheme

AIB chief executive Bernard Byrne arrives at Leinster House yesterday. Photo: Tom Burke
AIB chief executive Bernard Byrne arrives at Leinster House yesterday. Photo: Tom Burke

Michael Cogley and Charlie Weston

Changes to mortgage lending rules are likely to spur price increases in the market for entry-level homes, the head of AIB has predicted.

AIB chief executive Bernard Byrne said that rising prices would have a positive impact because it would encourage more development.

Mr Byrne was speaking at the Oireachtas Finance Committee, where he said the move introduced by Governor Philip Lane would have a positive impact on the market.

However, significant supply issues remain - with Mr Byrne hopeful that higher prices will encourage construction.

"One of the comments that would have come 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."

The Central Bank announced changes to its mortgage lending rules for first-time buyers on Wednesday that means those taking their initial step on the property ladder will need to raise 10pc of the purchase price.

This differs from previous rules, which meant first-time buyers were required to save 10pc of the purchase price up to a maximum of €220,000 and 20pc of the balance thereafter.

Mr Byrne praised the amendments to the rules and said it was likely to have a "positive impact" on the sector.

The Government also announced a help-to-buy scheme in last month's Budget, but figures released by property website 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 scheme.

Kildare has 344 of the properties that qualify, while Meath and Cork were next on the list.

Read More: Charlie Weston: Rule change will mean mortgage lending surges to €7bn next year

Daft.ie's Martin Clancy said: "We're continuing to see a lot of increased activity around new home searches. The majority of these searches are also matching up with areas that represent the bulk of properties available that qualify for the first-time buyers scheme, namely Dublin, Kildare and Meath."

Searches for new homes on Daft.ie continue to increase, with November seeing a 67pc increase in searches compared with last year.

The figures were released on a day that was dominated by discussion of the property market, including in the Dáil chamber and at the Finance Committee.

Mr Byrne told the committee that 14 mortgage holders had lost their homes on account of not having the right tracker rate attached to their home loans.

Around 2,600 mortgage account holders have been written to after being overcharged on their loans, the AIB boss said. The bank, which is 99.9pc owned by the State, has set aside €190m to cover the costs after the bank denied thousands of customers a tracker rate.


In an attempt to "right size" the positions of customers in arrears, Mr Byrne said the bank had written off €1.3bn in mortgage debt since 2008.

AIB head of financial solutions Jim O'Keefe told the committee: "We have about 37,000 mortgage structures in place; we have about 13,000 customers past due, which points to a still very significant number of customers in difficulty."

Sinn Féin TD Pearse Doherty said it was "criminal in the extreme" the bank had not acted to use the 569 vacant homes on its books to address the housing crisis.

Read More: Analysis: Making it easier for first-time buyers will hike up prices

Mr O'Keefe added; "We have made available the full listing of 500 properties through the Housing Agency at this point and we're working very actively to make sure we see those through to the agency."

Mr Byrne said the bank's performance in the summer's Europe-wide stress tests made it "obvious" that it needed to address its non-performing loans.

The bank's chief executive also said his institution is ready for a Government decision on the sale of the bank.

Irish Independent

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