Call us now for a Free Consultation: 059 9151932

Syndicated News

‘Rules will stop another housing bubble’

The new rules for mortgage lending will have less of an impact on the property market than “people might think”, according to the governor of the Central Bank, Patrick Honohan, who said their aim was to prevent another housing bubble from forming.

Only a quarter of first-time buyers in 2014 would have been affected by the new mortgage lending rules and 80% of these would only have had to increase their deposit by a maximum of 3%, he said.

Mr Honohan was speaking yesterday following the release of the Central Bank’s new rules on mortgage lending. In a concession from the original proposal, first-time buyers will only have to stump up a 10% deposit for the first €220,000 of a mortgage and 20% for the balance. All other house buyers will be subject to a 20% deposit and a 30% deposit for buy-to-let mortgages. Lending will be capped at a maximum of three and a half times’ salary.

There had been a huge backlash against the 20% deposit when it was first proposed for all house purchases last October. Ann Nolan, deputy head at the Department of Finance, said at a conference earlier this month that it had the potential to exclude first-time buyers from the market.

Tánaiste Joan Burton and other ministers had also raised concerns about the impact of a 20% deposit in first-time buyers.

However, Mr Honohan said he was not pressurised into making a concession for first-time buyers. There was a submission from “upper Merrion Street” [Department of Finance], which was a “well-drafted submission, noted the Central Bank governor. But it was only one of roughly 150 submissions, he added.

One of the criticisms of the Central Bank in the past was that it lacked independence and rarely introduced policy that was politically unpopular.

On this occasion, it had a certain amount of “room for manoeuvre” and the main priority was to come up “with a proposal that worked and [was] accepted by the public as working,” Mr Honohan said.

As reported by the Irish Examiner last week, the rules will be introduced immediately. They will be constantly reviewed and can be changed if needed, he added.

However, there was also a shortage of housing supply and this now needed to be addressed, Mr Honohan said. Moreover, one of the beneficial consequences of tighter mortgage lending rules is that it could lead to a more stable and better regulated renting market, he added.

Article Source: http://tinyurl.com/kbwqb42

< Back to Syndicated News