Fianna Fáil Spokesperson on Finance, Michael McGrath TD has cautiously welcomed the changes to the mortgage rules announced today by the Central Bank but is genuinely concerned about the combined effect on new house price inflation of these changes and the introduction of the ‘Help to Buy’ scheme.

Deputy McGrath added that “house price movements are now going to have to be very closely monitored in light of these policy changes.”

“A 10% deposit requirement for first time buyers is, in and of itself, fair and reasonable in our view. The truth is that many prospective first time buyers are, at present, paying massive rents in the private market, and are finding it incredibly difficult to save the required deposit to buy a home.”

“The big losers in this review are the non-first time buyers who will continue to need a 20% deposit after selling their existing home and clearing the mortgage. This is a very high bar for them to reach and will result in many families being trapped in houses or apartments that are unsuitable to their present or, indeed, future needs,” added McGrath.

“I have genuine concerns about the combined impact and effect on the price of new homes of the new deposit rules and the government’s ‘Help to Buy’ scheme.”

“Under the existing mortgage rules, and before ‘Help to Buy’, a first time purchaser buying a new home for €250,000 has to come up with a deposit of €28,000. Under the new rules and including the tax rebate under the ‘Help to Buy’ scheme, their new deposit requirement is €12,500, a reduction of €15,500.”

“If the new home is being bought for €400,000, the deposit requirement will fall from €58,000 to €20,000, a drop of €38,000. With a very limited supply of new homes on the market at present, there is a considerable risk of further house price inflation,” warned McGrath.

“In that regard, I welcome that Minister Noonan has agreed to Fianna Fáil’s request that an independent impact assessment of the ‘Help to Buy’ scheme be completed by next September and that this would examine its impact on house prices, the supply of new homes and the residential market generally.

“In the event that this impact assessment finds that the ‘Help to Buy’ scheme is directly leading to house price increases, then it should be ended,” concluded McGrath.