Fianna Fáil Finance spokesperson Michael McGrath TD has said the new Central Bank rules on mortgage lending could potentially result in thousands of non-first time buyers being trapped due to the onerous 20% deposit rule.
Deputy McGrath was giving an initial reaction to the new rules published by the Central Bank this evening.
He stated, “I welcome the easing of restrictions in relation to first time buyers. In our submission to the Central Bank, we had expressed grave concern at how the rules as initially proposed would impact on first time buyers. On first glance, it would appear that a sensible balance has been struck between the legitimate aspiration of families to own their own home and our collective determination to avoid the mistakes of the past. However, I am very concerned with the rules that are being proposed in relation to non-first time buyers as they do not take account of the complex housing needs that many people currently face.
“The Central Bank statement indicates “mortgages for non-first time buyers are subject to a limit of 80 per cent LTV”. In the absence of any clarification from the Central Bank, this would appear to mean that anyone who already has a mortgage and wishes to move home for whatever reason needs a 20% deposit in respect of the new mortgage. Due to the fall in house prices during the recession, many families have seen the equity in their home eroded making it close to impossible for them to come up with a required 20% deposit if they need to move home.
“This could result in an entire generation of people being trapped in houses and apartments which are no longer suitable for their needs even though they have demonstrated a clear capacity to meet their existing mortgage payments. It is simply unfair that a family who may never have missed a mortgage payment and now wishes to move to a new home is faced with an onerous 20% deposit requirement on the value of the new mortgage. For a family wishing to trade up to a €350,000 home they will now need to have €70,000 in cash having cleared their first mortgage with the proceeds from the sale of their home. This will prove impossible for many families.
“We will study these new rules in greater detail and provide further comment in the coming days.”