Honohan critical of Noonan over mortgage changes

The Central Bank governor has chastised Michael Noonan over the finance minister’s failure to consult with him on controversial potential mortgage rule changes.

Patrick Honohan hit out at Mr Noonan in a letter last May, saying he was “surprised” to hear of the measures despite a lack of discussion “formally or informally” with the body.

Under rules announced by the Department of Finance last summer but yet to be implemented, the Government suggested a “mortgage insurance” initiative to help people buy homes if they did not have a full deposit.

The policy change is designed to assist first-time buyers in particular, many of whom are young families and a key demographic of the voting public who have largely seen salaries stall during the recession.

The initiative would allow a buyer who has not saved a full deposit to claim a larger loan on condition the bank can take out an insurance policy if the home-owner’s financial problems worsen.

However, while the move was mainly welcomed by first-time buyers and banks — which would benefit by having a level of assurance on previously questionable sales — Mr Honohan said he should have been consulted before any announcement.

In a letter to Mr Noonan on May 19, 2014, obtained by RTÉ under the Freedom of Information act, Mr Honohan said: “I am surprised the opportunity was not taken to consult the Central Bank, whether formally or informally, on such an initiative, in advance of it being publicly announced.

“Considering the mandatory objectives of the Central Bank, advance consultation can have the benefit of helping to avoid adverse unintended side-effects of such schemes and contribute to the orderly development of effective Government policy in such matters.”

In response to the concerns raised, Mr Noonan said the input of Mr Honohan and the bank is always highly valued The Government has yet to introduce the scheme and has asked the Oireachtas finance committee to give it consideration.