‘Rent record must be relevant for borrowers’

The governor of the Central Bank will review whether rents will form part of a credit system when homebuyers apply for mortgages to counter concerns about stricter borrowing rules.

Governor Philip Lane also said political parties needed to propose “risk plans” in the election campaign in case the global economy falls into recession again.

Mr Lane, appearing before the Oireachtas finance committee, was told by Fianna Fáil’s Michael McGrath that people paying high rents were at a “serious disadvantage” when it came to saving for deposits for mortgages.

New rules for borrowers require them to have between 10% and 20% of a purchase price for a deposit .

Mr Lane said that, when he reviews the new mortgage rules in November, he would “definitely look at that part of it”. He told TDs: “A track record of paying rent has to be relevant when paying a mortgage.”

Mr McGrath said hopeful borrowers would find it “next to impossible” to raise deposits when renting, compared to those staying at home and saving.

“We’re meeting them on the doorsteps and they’re feeling trapped,” said the Cork South central TD.

Mr Lane said the Central Bank had to have a system that limits borrowing risks. The new deposit rules would help moderate home prices, he said.

Mr Lane was also asked by People Before Profit’s Richard Boyd Barrett about “fanciful” election promises being made by the outgoing government amid warnings about “storm clouds” gathering over the global economy.

He replied that there were “emerging risks” for big countries such as Brazil and China, adding that parties should also consider what if “bad events” happen when campaigning.

“If the world goes back into recession, what are the strategies then… you need to have a risk plan as well.”

Mr Lane said he would not interfere with banks and how they applied interest rates on variable mortgages. Despite concern Irish borrowers are paying multiples of what others are in Europe for such mortgages, Mr Lane said the Central Bank would not interfere with contracts.

He advised borrowers to switch mortgage providers if they had concerns.


Lifestyle

It turns out 40 is no longer the new 30 – a new study says 47 is the age of peak unhappiness. The mid-life crisis is all too real, writes Antoinette Tyrrell.A midlife revolution: A new study says 47 is the age of peak unhappiness

More From The Irish Examiner