The banks are back in the news for the wrong reasons again. Banks in Ireland have reclaimed the uncoveted title of having the highest mortgage interest rates in the Eurozone.
At a time when so few people seem able to get a mortgage, the idea of having to pay the highest rates in the zone rubs salt in the wounds.
Thousands of tenants who are paying exorbitant rents and would love to raise a mortgage deposit or have an income level required by a mortgage lender can only look on with envy.
Yet those who are managing to get a mortgage and buy a home feel so lucky they aren’t worrying too much about being gouged on the interest rate they pay.
If interest rates start to rise in the next couple of years, the borrowers will become only too aware of it. It makes it even more sickening when the banks charging these rates were bailed out by the very same people as taxpayers rather than as customers.
It is as if we have learned nothing from the carnage of the past 20 years in the housing market. Higher rates are automatically linked to a lack of competition among the banks.
We have seen some new specialist lenders enter the market, but it has rarely translated into lower rates.
Equally, the banks will argue how Central Bank rules governing how much capital they need to set aside for what they lend is behind the need to charge more.
Regardless of where the truth lies, real lives inevitably get caught in the crossfire. The relatively higher rates sum up how the housing market has failed those who want to buy, while sky high rents cripple those who choose or are forced to rent.
It wasn’t supposed to be like this. During the Celtic Tiger years, people flipped houses on borrowed money. Getting on the “property ladder” was viewed as essential because renting was ‘dead money’.
After it all went horribly wrong in 2008, there was a fear about borrowing money to buy property. The government at the time decided to shift the emphasis away from home ownership, which was now seen as risky, to renting.
Ireland’s rate of home ownership had grown steadily after independence. It reached a peak of 79.3pc in 1991. Successive government policies had directly supported home ownership.
During the boom years, as some couples became amateur landlords with three properties, others found it all too expensive and rented instead.
After the crash everything got turned on its head. Prominent voices suggested that if we could ensure decent rental properties with long leases, strong tenant rights and rental certainty, we could become like a continental European society built around renting instead of buying.
Government policy after the crash was aimed at attracting foreign capital into Ireland to build rental properties. This helped push up house prices and rents. This also helped to restore bank balance sheets as rising house prices made them look less dependent on financial life support.
Rising prices would also help the hundreds of thousands of home owners get out of negative equity. We were to become a nation of renters after all.
Home ownership rates have fallen significantly since the crash as the number of households renting has risen by 56pc. This is all well and good – except people didn’t get the continental European-style tenant rights, rent controls or long leases.
Instead, as banks pulled right back from lending money to buy houses in 2010, 2011 and 2012, rents shot up. Rents in Dublin went up by 30pc between 2013 and 2014. Cash buyers snapped up cheaper houses that came on the market.
Bizarrely, in 2015 the Department of Finance shot down proposals from Alan Kelly, then minister for the environment, to curtail rent increases. At the time, they said his plans would represent too much interference in the housing market.
Yet the State was the biggest paying tenant in Ireland. Instead of building more social houses, it was forking out €500m a year on various rental supports to tenants, who should have been housed in affordable homes.
It took it years to figure out this was dead money.
Yet all the answers were there as far back as 2014. A National Economic and Social Council (NESC) report said at the time that the government should promote either home ownership or long-term rental. We got short-term rental and home ownership for the few.
Called Home Ownership and Rental: What Road is Ireland On?, the NESC report was presented to Enda Kenny, then taoiseach, warning how a range of social classes will “find it difficult if not impossible” to buy their own homes in the future.
Looking at Housing Minister Darragh O’Brien’s Housing For All plan, the pendulum has swung back toward home ownership and the State developing its own social homes.
Our brief experiment with being a rental society is coming to an end. We know now for sure, again, that we prefer to be a nation of home owners.
But even if the thinking and the zeitgeist change, the switch has to actually come about. So much damage has been done.
People’s lives have been so affected by the lack of affordable housing, either to buy or rent, that it is very hard to simply move on.
People are financially committed to living in places they would never have wanted to live. Others are losing out on so many aspects of their lives because of long commutes, living at home with parents or simply handing over too much of their income on rent. People have put having children on hold.
More houses will be built in the coming years. New house starts in Dublin have reached the same levels as at the peak of the building boom. Sounds impressive. But there are nearly 250,000 more people living in the Dublin area than there were in 2005. We have a long way to go.