Tuesday 12 November 2019

Honohan now has to compromise


Minister for Finance Michael Noonan is just one of the people who has questioned the 20pc rule
Minister for Finance Michael Noonan is just one of the people who has questioned the 20pc rule
Charlie Weston

Charlie Weston

WHO would be governor of the Central Bank Patrick Honohan at the moment? He has set himself up for a fall, one way or the other. The proposal by Professor Honohan's regulatory authority, to tighten mortgage lending, has merit and has been done for the best reasons - to forestall the banks all over again from bad lending. The proposal is likely to have been encouraged by the Prof Honohan's fellow governors at the European Central Bank.

But the plan has been attacked from all quarters. Taoiseach Enda Kenny, Tanaiste Joan Burton and Minster for Finance Michael Noonan are among those who have questioned the blunt proposal to require most borrowers to have a 20pc deposit and have borrowings limited to three-and-a-half times income.

Mr Kenny has even threatened to introduce a mortgage indemnity scheme that would effectively override the plans to set minimum deposit levels.

Now the prestigious International Monetary Fund (IMF) has joined the chorus of those complaining that the initial proposal for a 20pc deposit for the majority of borrowers is too severe.

The IMF wants a gradual introduction of the measures to ensure people do not over-borrow at a time when a housing shortage is causing property prices to spiral.

All of this pressure to ease up on the original tough measures to restrict lending means that Prof Honohan will be left with little choice but to water down his proposals.

His one big intervention in the market is set to be rolled back. He will either have to delay the introduction of the new limits, or impose less stringent restrictions.

His colleagues in the ECB won't be pleased, but then they do not have to face the extraordinary backlash about the original home deposit demands.

Irish Independent

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