Fianna Fáil Finance spokesperson Michael McGrath has called for a planned Central Bank review of mortgage rules to begin immediately to avoid a prolonged period of disruption in the market. He was speaking following an interview with new Central Bank Governor Philip Lane in the Irish Times this morning in which he stated that the current rules would be examined in the summer.
Deputy McGrath commented: “Potential first time buyers and those looking to trade up will be disappointed that a review of the rules is not likely to commence for six months. Given the time it takes to assess submissions and implement any revisions decided upon, it is likely to be the end of the year at the earliest before any substantial changes are made. There is a very real risk that this will result in the already sluggish mortgage market grinding to a halt as potential buyers and sellers wait to see the impact of any new regulations.
“Now that the Governor has signalled that there is a need for a formal review to take place, it would be far better if this was to commence immediately to avoid a prolonged period of uncertainty. At a time when the economy is recovering and there is a growing housing crisis, such disruption would not be in anyone’s interest.
“Earlier this week I suggested that, when a review of the rules takes place, it should give consideration to how rent paid by potential buyers is treated. Many young couples are now caught in the vicious circle of not being able to save for a deposit because of the cost of rent. They face the prospect of never being able to buy their own home despite being able to meet the monthly cost of a mortgage.
“A survey carried out by Daft.ie last September found that it was cheaper to buy rather than to rent in 43 out of 54 areas covered by the survey. This means that, in up to 80% of the country, individuals and couples would actually be financially better off on a monthly basis paying a mortgage than paying rent for an equivalent property.
“Fianna Fáil is suggesting that the Central Bank examines the potential of allowing 25% of the deposit requirement for a first-time buyer be met by taking in to account rent payments over the previous three years. This could potentially open up home ownership to a considerable cohort of people who have proven their ability to meet a monthly mortgage but are effectively shut out of the market at present because of the deposit rules. For example, a deposit requirement of €20,000 under the Central Bank rules could be reduced by €5,000 under our plans.
“It is our view that twelve months after the mortgage rules were put in place it is now an appropriate time to examine how they are working in practice. There has certainly been a stabilising of house prices but there also appears to have been unintended consequences in terms of the impact of the rules on potential first time buyers, those looking to trade up and the rental sector. Now is the time to assess all these issues and decide if changes are appropriate.”