We need your help now

Support from readers like you keeps The Journal open.

You are visiting us because we have something you value. Independent, unbiased news that tells the truth. Advertising revenue goes some way to support our mission, but this year it has not been enough.

If you've seen value in our reporting, please contribute what you can, so we can continue to produce accurate and meaningful journalism. For everyone who needs it.

Shutterstock/Big Ray
rebuilding ireland

'Sneaky': Government home loan scheme for first-time buyers raised its interest rates this week

The difference in repayments over the lifetime of the mortgage would mean first-time buyers would pay thousands more.

A GOVERNMENT-BACKED scheme designed to make it easier for first-time buyers to get a mortgage has raised its interest rates in the past week in a move the opposition has described as “sneaky”. 

The previous interest rate for a 25-year mortgage of 2% has risen to 2.745% and the rate for a 30-year mortgage has gone from 2.25% to 2.995%.

Where the funding for the scheme itself was under scrutiny last year, Labour’s housing spokesperson Jan O’Sullivan said this “cold harsh move” shows that Fine Gael has “[no] idea of the desperate housing reality that so many are facing”.

The government’s Rebuilding Ireland Home Loan scheme was launched in January 2018 with funding to the tune of €200 million over a three-year period to provide loans for first-time buyers.

The RIHL is a government-backed mortgage for first-time buyers which you can avail of through your local authority. The buyers can use the loan to purchase a new or second-hand property or use it for a self build.

Crucially, it can offer up to 90% of the market value of the property making it an attractive option for those looking to get a mortgage.

In frequent parliamentary answers, Minister Eoghan Murphy has said “the low rate of fixed interest associated with the [RIHL] provides first-time buyers with access to mortgage finance that they may not otherwise have been able to afford at a higher interest rate”. has reported that the scheme was said to be in jeopardy last year, as the government had underestimated the demand for the scheme and the amount of funding it would need. 

One prospective buyer spoke to pointed out how the rate rise would effectively mean a greater deposit is needed to guarantee the mortgage given the increase in the interest rates.

For example, using the loan calculator on the RIHL website, a 30-year-loan mortgage for a property worth €320,000 in Dublin for a single person earning €40,000 had an “indicative monthly repayment” of €765.

image (49)

However, in the same situation with the rate increase, that figure is now €784.

image (50)

The move also comes after Ulster Bank cut its interest rates in an announcement made just yesterday.

In a Labour statement describing the rate rise as “sneaky”, O’Sullivan said: “Neither home loan applicants nor local authorities were advised of a possible increase, and instead a circular was snuck through detailing that the increase would take effect immediately.”

The circular reads: “Rebuilding Ireland Home Loans – Funding and Scheme Update (14 Jan 2020) adds an increase of 0.745% contribution to the Mortgage Arrears Resolution Process Premium Fund (MARP) resulting in a rate increase from 2% for a 25 year on to 2.745% and from 2.25% for a 30 year loan to 2.995%.”

MARP is a requirement under Central Bank rules whereby lenders must operate a framework for dealing with borrowers in mortgage arrears or in pre-arrears.

According to the Central Bank, MARP procedures should incorporate communication with borrowers, financial information and a resolution to the issue of arrears.

O’Sullivan said she’d like to know “what the rationale is behind the move for almost quadrupling the contribution to this fund, and on what evidence it’s based”.

“This change makes no provision for individuals or families with applications already under consideration, and will no doubt exclude a significant cohort of people who just won’t be able to use the scheme,” she added.

At a press conference launching Fine Gael’s housing policy today, Minister Eoghan Murphy acknowledged the move would mean higher interest rates than those who’ve already secured the mortgages.

He said the mortgages were still “incredibly affordable”, the rate change would only affect new customers and that the “minimal” change was necessary on guidance from the Department of Public Expenditure and Reform.

In a statement to, a spokesperson for the Department of Housing said: “For new applicants, RIHL remains the most affordable mortgage on the market and the only one that is at a fixed rate for the entire duration of the loan and the only one which does not have to take account of the Central Bank’s loan to income ratios.

The revenue received from the change in interest rates is being ringfenced to the MARP premium fund (Mortgage Arrears Resolution Process), established by the Government in 2012 to support people who may get into repayment difficulties so they may remain in their home. 

An independent review from the ESRI issued a number of recommendations for the future of the RIHL scheme. One of them was to increase the interest rate, and this was implemented earlier this week. 

Your Voice
Readers Comments
This is YOUR comments community. Stay civil, stay constructive, stay on topic. Please familiarise yourself with our comments policy here before taking part.
Leave a Comment
    Submit a report
    Please help us understand how this comment violates our community guidelines.
    Thank you for the feedback
    Your feedback has been sent to our team for review.

    Leave a commentcancel