Mortgage rules may push up house prices further
There was a mixed reaction to the Central Bank’s move to reduce deposit requirements and ease the lending cap, which will benefit first-time buyers locked out of the housing market.
First-time buyers will now only require a 10% deposit, regardless of the price. Previously, it was 10% on the first €220,000 and 20% on the balance.
The change comes after the help-to-buy grant in the budget, which returns 5% of a home price to buyers.
Housing Minister Simon Coveney said the two changes would help buyers get a deposit together. The two are also distinct, suggested the Fine Gael minister: “The Help-to-Buy scheme is for people buying new homes while the new Central Bank rules are for new and secondhand homes,” he said.
Mr Coveney also told Newstalk Breakfast that only 2% of new homes were bought by first-time buyers last year.
“We have a generation of first-time buyers who are locked out of the market. Now we’re helping to relieve that.”
Others though suggest the easier borrowing terms will just inflate prices.
Fianna Fáil’s Barry Cowen suggested 95% mortgages were back in town.
Karl Deeter of Irish Mortgage Brokers went further and said the new bank lending rules, coming into force in January, would eventually lead to a widespread return to 100% mortgages being given out by lenders.
The Central Bank deputy governor, Sharon Donnery, earlier denied that political pressure was applied to make the changes. She noted that three quarters of first-time buyers borrowing more than €220,000 put down larger deposits.
House prices could potentially go either way going forward, she told RTÉ: “There are risks of house prices going up and also risks of them going down. It is a very complex dynamic. If supply is increased there could be a change in price.”
The Central Bank has also signalled it will intervene in the event of runaway house price inflation arising from changes to mortgage lending rules and the budget tax rebate scheme for first-time buyers.
Lorcan Sirr, a lecturer in housing at the Dublin Institute of Technology, also said he believes the Central Bank rules on mortgages for first-time buyers will result in a rise in house prices. It is the cost of homes themselves that needs to be questioned, he said, rather than the amount in loans people are taking out.
There has also been concern that non-first-time buyers will not benefit from the eased mortgage rules, for those wishing to trade up.
Meanwhile, Mr Coveney said yesterday he will shortly be announcing a rent strategy including plans for affordable rentals in parts of Dublin aimed at middle-income earners.
He said a balance needs to be found to help tenants and to do it in a way that does not undermine people who want to invest in rental properties.
