Central Bank backs scheme

The Central Bank has warned that any State-backed mortgage insurance scheme could damage the property market by introducing “systemic problems”.

In an economic letter outlining the pros and cons of the introduction of a mortgage insurance scheme — to make home loans more attainable and affordable to buyers in light of new lending rules and mandatory deposit levels for borrowers — Central Bank senior economist Niamh Hallissey said it would be a riskier move if guaranteed by the State rather than backed by insurers.

“From a macroprudential perspective [which evaluates health, soundness, and vulnerabilities of a system], mortgage insurance does not remove the risk of a systemic crisis, but shifts this risk from the lenders to the insurers. If this risk is concentrated in a small number of mortgage insurers, or in a State-owned insurer, this could increase the systemic problems in the underlying market,” she said.