Sunday 27 May 2018

Relaxing income limit is bad solution to a bigger problem

Loan-to-value restriction is designed to protect the banks and the taxpayers, writes Colm McCarthy

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Colm McCarthy

Colm McCarthy

There is no national housing crisis. In most parts of the country second-hand homes are for sale at prices that are affordable and below the cost of construction. The deposit required under Central Bank rules in these areas is no more than the price of a small car. Rents are also modest in most counties and there is little need for new construction.

There are two serious housing problems. Those without the means to house themselves are unable to access social housing, hence the long council waiting lists around the country. In Dublin and a few other urban areas, house prices are returning to bubble figures. There is limited new supply even though second-hand homes trade well above construction cost. People on middle incomes in Dublin feel priced out of home ownership.

It is vital to be clear that neither of these pressing problems is addressed by a relaxation of the Central Bank's mortgage lending rules. The Irish banks went bust (every single one) for lots of reasons, but excessive provision of finance into a dysfunctional housing market was at the heart of the disaster.

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