Monday 19 August 2019

Loosen up rules on mortgages – Leo tells watchdog

Taoiseach on collision course with Central Bank over its strict home loan requirements

Leo Varadkar (Niall Carson/PA)
Leo Varadkar (Niall Carson/PA)

Hugh O’Connell

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 are set to put him on a collision course with the independent regulator, Mr Varadkar said that he found aspects of the mortgage lending rules “very tough”.

He pointed to young couples who are trying to save for a deposit for their first home but also have to pay as much as €2,000 in rent.

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

His remarks will be seen as Fine Gael coming under pressure on affordability of mortgages ahead of the next general election.

Speaking at the MacGill Summer School in Glenties, Co Donegal, yesterday, Mr Varadkar said: "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 €2,000 a month you would be able to save.

"We have a lot of people who are paying more in rent than they would pay for their mortgage. There is a real mismatch there.

"House prices are still 20pc lower than they were 12 years ago and they are levelling off, 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."

Lending limits were introduced by the Central Bank in 2015 with banks limited to lending three-and-a-half times a buyer's income.

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

Mr Varadkar said he bought his home in the mid-2000s using a 100pc mortgage that was available at the time, but acknowledged "that is now very difficult for people".

The Taoiseach's remarks are a highly unusual intervention given that responsibility for mortgage-lending rules lies with the Central Bank.

While he stated that the bank is independent, the comments will be seen in some quarters as the Taoiseach pressuring it to change lending rules for banks.


In 2006, then-Tánaiste Michael McDowell, in the build-up to the 2007 General Election, vowed to scrap stamp duty for first-time buyers.

His promise lead to a slump in house sales as would-be buyers waited to see if he delivered on it.

Mr Varadkar's comments, which will be seen in some quarters as meddling in the property market - risking house prices rising - come at a time when the Government is under pressure over the housing crisis and with an election in the offing.

The Central Bank said last November that the rules needed to remain in place as they were achieving financial stability and protecting consumers. The strict lending rules have been widely credited with slowing the pace of house-price growth.

Irish Independent

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