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Want to buy a house next year? You may not actually need a full 20% deposit

New rules restricting banks from granting loans of more than 80% of the property value were due to come into force in January 2015 but there may be a way around that.

THE CENTRAL BANK Governor Patrick Honohan has indicated that there may be an easing of the 20% mortgage deposit rule.

Just last month, new rules were announced which would restrict banks from granting mortgages that are more than 80% the value of the property. The plan was for these rules to come into force in January 2015.

However, in a speech at the annual conference of the Money Advice and Budgeting Service (MABS), Honohan discussed the potential of mortgage insurance, which would allow person to pay just 10% of the value of a home if the other 10% was covered by an insurance company.

While the Central Bank governor was quick to point of that specialised mortgage insurers in the US “did rather badly” in the recent financial crisis, he said it is a method that has been used in that country for almost a century to enable borrowers to get financing for homes without having to save that 20%.

Honohan pointed out that too liberal a use could impact on the effectiveness of measures to stop another property bubble but this could be managed if it was limited to relatively small loans or first time buyers, he said.

“Meanwhile we at the Central Bank will not shirk our responsibility to do what is in our power to deliver on our mandate to protect the new generation establishing households – and the nation at large – from the risk of a repetition of what happened before,” he commented. “We seek to do so with the minimum of adverse side-effects.”

Read: Bubble buster: Homebuyers face 20% deposits as banks hit with tighter controls>

Read our Property Magazine for advice on buying and selling a home> 

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