Cowen urges borrowers to ‘be prudent’ on housing

FINANCE Minister Brian Cowen warned of the need for prudence by borrowers in the context of the booming housing market.

Addressing the annual conference of the Real Estate Alliance, Mr Cowen sounded more cautious than Taoiseach Bertie Ahern, who last week said those who listened to negative commentators on the housing market lost out last year as prices continued to rise.

But look before you leap was the advice of the Finance Minister.

He highlighted the comments of the Central Bank on Wednesday when it warned of the need for caution when getting involved in heavy levels of debt.

“I think the Central Bank have outlined in their report yesterday that the level of personal indebtedness is rising. That’s obviously a reflection of the level of investment that’s going on as the housing market continues to boom,” he said.

Given that we have faced two interest rate hikes since December 2005 and that rates look certain to increase further over the next 12 months, it was quite possible some people would face increased pressure on loan repayments, he said.

Mr Cowen urged caution on the basis that ECB rates are rising and will continue to do so.

“We have had two small interest rate increases since December 2005 and the prospect of higher interest rates during the course of this year it is very right and proper to simply say to people be prudent.”

On the theme of the conference, entitled We Find Foresight Works Better, Mr Cowen said the construction industry had responded to demand for new houses by increasing its output.

“Over the last 10 years, over half-a-million new dwellings were built. Last year saw the construction of a record 81,000 units. We are now building 20 houses for every 1,000 people living here, compared to just five per thousand for the EU as a whole,” he said.

The buoyancy of the housing market reflects the innate strength of our economy’s performance over the last decade or so, as well as the impact of a number of accommodating monetary factors, such as historically low interest rates, and increasing competition and innovation in the mortgage market, he said.

“Looking ahead, while interest rates have risen and may rise further, the other fundamental driving factors that I’ve outlined should continue to influence the market,” he said.