Fianna Fáil Finance Spokesperson Michael McGrath has said that the insurance scheme for mortgage deposits for first time buyers is nothing more than a pre-election gimmick and doesn’t tackle the real problems faced by first time buyers when trying to purchase a home.

Deputy McGrath said, “Minister Noonan flagged yesterday that this idea might be included in the next Finance Bill. However, the Finance Bill 2014 is still six months away and little thought appears to have been given to this idea before the Minister flagged it days ahead of an election. There is a far greater problem on the supply side of the residential property market, and this is where the Minister should be focussing his attention.

“The Minister’s scheme seems to be based on the premise that first-time buyers are required to have a deposit of 20% of the house price. This is not the case. AIB is currently offering mortgages to first-time buyers of up 92% of the purchase price. Bank of Ireland, Ulster Bank and Permanent TSB are offering loan to value mortgages for first time buyers of up to 90%.

“First-time buyers who are not in permanent employment, who are self-employed or who have a blemish on their credit rating, find it difficult to get a mortgage from the bank. If they do manage to get a loan, they face the problem of poor supply in certain locations. If they find a house they want to buy, they are competing with investors that Minister Noonan has incentivised to come into the market. The Minister is encouraging investors to buy homes up to the end of 2014 in order to avail of an exemption from capital gains tax if they hold the property for seven years. This tax break for property investors has made it much more difficult for first-time buyers to purchase a home.

“If this idea is ever implemented, it is likely to be so cumbersome and bureaucratic that few first time buyers will have the opportunity to avail of it. For example, the government’s big idea to help SMEs gain access to credit – the Temporary Partial Loan Guarantee Scheme – has failed to deliver because it is so complicated and inaccessible.

“I am led to the conclusion that the Minister’s real agenda is to drive up house prices, which will again have the effect of putting home ownership out of reach for many would-be first-time buyers, and to shore up the balance sheets of banks.”