Housing minister rejects claim that new First Home Scheme will fuel inflation

Applications for the First Home Scheme opened on Thursday afternoon, with more than 60 reported in the first hour.

Darragh O'Brien said: "We're looking at activating around €75m to €80m in mortgages this year, it's a tiny percentage of the overall market." File photo: Sasko Lazarov / RollingNews.ie

The Housing Minister has denied that a new flagship scheme for first-time buyers is designed to get around Central Bank lending rules or would fuel an already overheated market.

Darragh O'Brien on Thursday launched the First Home Scheme, a €400m plan which will see the Government and banks bridge the "existing affordability gap" by providing buyers with part of the purchase price for their home, in return for the scheme taking a minority equity stake. 

The maximum stake that the scheme will take is 20%, if the buyer is also availing of the Government’s separate Help to Buy scheme, and 30% if Help-to-Buy is not used. Applications for the scheme opened on Thursday afternoon, with more than 60 reported in the first hour.

However, Mr O'Brien denied that the scheme was being used to skirt macroeconomic lending rules overseen by the Central Bank which limit the majority of homebuyers to borrowing 3.5 times their income. He said that the scheme would be "a gamechanger" for buyers.

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"We're looking at activating around €75m to €80m in mortgages this year, it's a tiny percentage of the overall market. There are people who are paying €2,000 a month in rent who can't get mortgages who will be paying €1,100 in a mortgage if they get a home with this scheme."

Mr O'Brien said that he does not believe the scheme is inflationary but did not say if modelling was available for how much the Government could make or lose if the value of its equity stakes goes up or down.

For the purposes of the scheme, those who sell homes because of divorce, separation, or insolvency will be considered first-time buyers.

'Boon for developers'

However, opposition spokespeople criticised the scheme. Sinn Féin's Eoin Ó Broin described the government’s scheme as a "pro-developer scam". Labour housing spokesperson Rebecca Moynihan has expressed concern about the scheme, which she called a "boon for developers".

“A similar scheme in London resulted in inflation of almost 6%," she said.

"It’s a for-profit, demand-side measure that will increase house prices and make housing even more unaffordable for people."

Joe McHugh

Meanwhile, when asked about the decision of former Education Minister Joe McHugh to vote against defective block legislation in the Dáil, Mr O'Brien said that he was pleased the legislation had passed the Dáil on Wednesday. He said that Mr McHugh has engaged throughout the process.

"What we need to do is get this scheme up and running. If we did what the opposition wanted, residents would be waiting for two more years."

He said he did not regret that just two hours was allotted to the legislation's debate.