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Thursday 30 November 2023 Dublin: 3°C
first time buyers

Will Enda snub the Central Bank to keep deposits at 10 per cent?

A new mechanism to make sure houses remain affordable for first-time buyers is being considered by the coalition.

TAOISEACH ENDA KENNY has indicated that the Government will intervene with a move to counter the recently announced strict Central Bank rules on mortgages.

The regulator announced earlier this month that lenders are to be restricted from granting mortgages that are more than 80 per cent of the value of the property —which effectively means that homebuyers will be required to raise 20 per cent of the value of the property as their deposit.

The new rules on lending are expected to come into force from January 2015 following a brief consultation period.

However, concerns have been raised that the move, aimed at dampening the chances of another property bubble, could effectively put the opportunity to own a home out of the reach of many.

Speaking yesterday, former Finance junior minister Brian Hayes said the rules needed to be looked at again, stating they could have “unintended consequences”.

That coincided with a speech by the Taoiseach in which he said that the Government “wants home ownership to remain an attainable ambition for young, credit-worthy families”.

“Without access to mortgage credit, young families will place increasing demands on the rental and social housing markets,” the Taoiseach said.

He said a balance needed to be struck between the need to ensure “tight prudential regulation of the banks” with the need to “ensure continued mortgage availability” for first-time buyers.

The Irish Independent ran a front-page story this morning stating this meant ten per cent deposits would be kept. The paper says it understands that the Government will use the insurance scheme to “get around” the Central Bank rules.

The mechanism would mean that the State would guarantee a portion of the mortgage being given out by a lender.

Photocall Ireland.

According to the Taoiseach, again…

In the UK, Finland and Canada, for example, “mortgage insurance” markets have been developed to support mortgage lending to First Time Buyers, while also improving the quality of such lending and reducing the risk to the banks themselves.

He added:

I would like to see further consideration of the merits of a mortgage insurance scheme in the Irish context as a way to ensure adequate availability of mortgages for First Time Buyers.

The Minister for Finance is to ask the Oireachtas Finance Committee to prepare a report on the issue, “drawing on the experiences of other countries and domestic and international experts,” Kenny said.


One expert who spoke to this morning described the intervention as  ”the worst of both worlds”.

“Both sides need to step back. We’re not in a credit bubble and the lending that’s going on at the moment is prudent,” Karl Deeter of Irish Mortgage Brokers said.

The Government getting involved in lending wasn’t a good idea, Deeter said. And he cautioned that the regulators mortgage cap would simply result in home-buyers seeking short-term loans to cover the gap in their finances.

Former Fine Gael Junior Minister Lucinda Creighton also took to Twitter to express her criticism of the Government’s intervention.

Read: Buying a house? Here’s what you need to be earning under the new rules

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

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