23 November 2016

Labour Party Finance Spokesperson Joan Burton has welcomed the relaxation of the deposit rule for first time buyers but noted that problems still exist with the Central Bank rules.

  • Home owners in negative equity who wish to trade up are still restricted.
  • Rent payments are still not taken into account onability to afford a mortgage.
  • Help to Buy Scheme will aid developers to drive up property prices.
  • Welcomed decision of Minister Noonan to accept her proposal to carry out an economic impact assessment on Help to Buy Scheme

Commenting on the revised Central Bank mortgage rules, Deputy Burton said:

“I welcome the revised rules from the Central Bank that will mean first time buyers will be able to access mortgages of up to 90% of the value of a house over €220,000. This means many more will now be in a position to purchase affordable homes.”

“The revised 10% deposit rule for first time buyers will help those in Dublin, Cork and other urban areas in particuler where house prices are substantially over the previous limit of €220,000.”

“In these areas, often only those that could rely on the bank of Mum and Dad to help with a deposit were realistically able to afford homes”

“For a standard 3 bed house that might cost €350,000 in Dublin, a first time buyer was expected to have a deposit of €48,000. Now they will require €35,000”

“That is still a huge sum for a couple to save who are also having to pay record rent levels, increased costs of living, and high childcare costs.”

“As I said in the Labour Party submission to the Central Bank those paying high rents are restricted in their ability to save for a deposit and often times pay a higher rent than they would in a mortgage, and no account is taken of this in the rules.”

“When calculating the 3.5 times loan to income ratio, and whether a first time buyer can afford a mortgage, the revised rules still take no account of ability to pay.”

“However, questions now also have to be asked whether the introduction of the Help to Buy scheme for new builds will now more than likely lead to house price inflation, that will directly benefit developers.”

“I had tabled amendments to the Finance Bill to ensure a rigorous economic impact assessment was carried out next year on the Help to Buy scheme, and I welcome the agreement of the Minister for Finance today that he would carry out such a study by September 2017.”

“Unfortunately, the revised rules still do little to help those in negative equity, nor those families who maybe bought an apartment at the height of the boom, are locked into a large mortgage, but now find themselves needing a larger home, but unable to secure a mortgage with the requirement for a 20% deposit. There are many families who will also be renting out their mortgaged apartment, while renting a larger home elsewhere reducing their ability to save for a new home.”

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