Mortgage initiative ‘could push prices up’

A new Government-backed mortgage scheme will not solve the severe shortage of homes and could further push prices up, it has been claimed

Plans for a low-interest mortgage to help lower-income families and individuals who have been refused loans by the banks have been criticised by opposition parties and housing groups.

Housing Minister Eoghan Murphy has announced a Rebuilding Ireland Home Loan scheme for first-time buyers, which can be used to buy both new and second-hand proprieties or to build a home.

Applicants can choose a fixed rate of 2% to 2.25% interest for 25 to 30 years, which is below what commercial banks are offering.

The scheme will be open to individuals earning less than €50,000, while a couple cannot earn more than €75,000 and there is a limit on the value of the property they can purchase.

However, Fianna Fáil housing spokesman Barry Cowen said the measure is an affordable loan scheme, not an affordable housing measure.

“If the housing supply remains in the doldrums we can expect prices to continue to rise leaving first-time buyers frozen out of the market,” he said.

This was echoed by Sinn Féin housing spokesman Eoin Ó Broin, who said he was “deeply disappointed” by the new schemes as they will have “little impact” on affordability.

“The Government’s focus should be on providing a stream of genuinely affordable homes ranging from €170,000 to €260,000 for those earning between €45,000 and €75,000.”

David Hall of the Irish Mortgage Holders Organisation said the measure is a “distraction and decoy”.

“Ultimately the issue is around supply. It may help some people but it is not the long-term solution,” he said.

However, Brokers Ireland described it as “an excellent move” that would bring on better competition among lenders. Rachel McGovern of Brokers Ireland said the low- fixed interest rate is particularly welcome.

The Institute of Professional Auctioneers and Valuers predicted that the scheme would be over-subscribed, given its attractiveness combined with pent-up demand for homes.

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