The proposed new 20% minimum deposit requirement for first time buyers will put home ownership beyond the reach of many forever, according to Fianna Fáil Finance Spokesperson Michael McGrath.
Deputy McGrath commented, “It would appear that a decision from the Central Bank on the proposed new mortgage lending rules is imminent. I believe the proposed 20% minimum deposit level is excessive and unnecessary. As set out in our submission to the Central Bank on these proposals, Fianna Fáil believes first time buyers should be required to have a minimum deposit of the order of 10-12% of the value of the property.
“Most first time buyers looking to buy a three bedroom house in Cork City and surrounding suburbs will now be paying over €200,000. If introduced, the new rules would require these first time buyers to have a minimum deposit of €40,000. In Dublin, these figures would be much higher again. At a time when rents are spiralling, anyone renting in the private sector will find it next to impossible to save a deposit of this level. My experience of dealing with individuals and couples aspiring to buy a home in my own constituency is that deposits of this order are unrealistic and simply unachievable.
“It is our view that the capacity of a person to repay a mortgage is a far more meaningful measure of the affordability of a mortgage than setting a 20% minimum deposit level. Setting such a high deposit threshold serves to provide a buffer for the banks in the event of a fall in property prices. If the Central Bank decides to press ahead with its plans, we believe the minimum deposit required should be phased in over a number of years so as not to create a sudden dislocation in the market.
“We believe that the recent dramatic escalation in house prices – especially in Dublin – is primarily driven by a lack of housing supply rather than by any suggestion of free flowing credit. In this regard, we believe that in parallel with new mortgage rules, a concurrent strategy to ensure a stable supply of suitable new housing units is needed. We have also recommended to the Central Bank that affordability rules should be based on net disposable income and not simply a loan to income multiple.
“I believe our proposals to the Central Bank would deal with the huge swings in house prices and activity which are both economically and socially destabilising. A stable, consistent, balanced property market is essential for social and economic cohesion into the future. Even at this late stage, I would call on the Central Bank to reconsider these proposals and to consider the impact on society if home ownership is no longer to be a realistic goal for many.”