Finance Minister Michael Noonan’s €20,000 grant for first-time buyers will be axed if it is found to be inflating the property market, it emerged yesterday.
In the wake of the Central Bank’s review of its mortgage policies, the Government and Fianna Fáil have expressed concern that the combination of the help-to-buy scheme and the more relaxed lending rates could overheat the market. Fianna Fáil finance spokesman Michael McGrath has said the party will force the termination of the scheme if they deem house prices are spiralling out of control.
“If we are presented with evidence from an independent impact assessment that the Government intervention is pushing up prices, we can’t stand by. If it is definitely resulting in increased house prices, it will have to come to an end,” said Mr McGrath.
Last week, the Central Bank shocked many by relaxing its lending rules, which now mean first-time buyers can now borrow 90% of the value of a home.
Finance Minister Michael Noonan welcomed the change in the Central Bank policy, saying it “should enable all of those borrowing to purchase a home to find it easier to source a mortgage that suits their needs”. In particular, he welcomed the abolition of the €220,000 loan-to-value threshold limit for first-time buyers.
However, behind the scenes there is an awareness within the Government of the potential of the already supply-shy house market overheating, and last night a senior source said a “close eye” was being kept on matters.
Industry insiders have warned the combination of the two measures will force price growth of up to 10%, particularly in the greater Dublin area and surrounding commuter counties.
Ken Lowe, chief executive of estate agents DNG, said: “I believe this change will now lead to sharper price rises at the lower end of the market and in the new home sector.”
Property economist Ronan Lyons, has been critical of the Central Bank’s change of tact since it introduced its tougher new rules in 2015.
“The obvious effect of this will be to push up prices, but what is perhaps even more puzzling is that the changes will have the biggest upward pressure on prices for the most expensive and therefore riskiest types of properties,” he said.
“Take a property costing €750,000 — one where the borrower and lender face a much greater risk of a fall in value of €100,000. Here, the deposit requirement has fallen over 40%, from €128,000 to €75,000.”
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