Fianna Fáil Finance spokesperson Michael McGrath has said that the Central Bank rules on mortgage lending, in place since February of last year, need to be reviewed to examine the impact they are having on the ability of young couples and individuals to purchase their first home. In particular, he is calling for the rules to be modified in order that an established track record of paying rent is taken as evidence of ability to service a mortgage.
“These people are now caught in a catch 22 situation whereby they would have lower monthly outgoings as a result of buying a house compared to renting but the monthly burden of their rental payment is severely restricting their ability to save the deposit they need. Under present rules, an aspiring home buyer living at home with parents is in a far stronger position to save for a deposit than someone renting privately. The mortgage deposit rules have to take some account of this.
“In our election manifesto, Fianna Fáil will be putting forward a proposal which will establish a state top-up of 25% for regular savers who are putting money aside for a deposit. This will be a significant help to home buyers over the medium term but we also need to do something to help those potential home buyers who have shown clear capacity to pay a mortgage but are restricted in their ability to save for a deposit by high rents. This is a particular problem in urban areas where the rental crisis is most acute.
“I am suggesting that the Central Bank examine the potential of allowing up to 25 per cent of the deposit requirement for a first time buyer be met by taking in to account rent payments over the previous 3 years. This could potentially open up home ownership to a considerable cohort of people who have proven their ability to meet a monthly mortgage but are effectively shut out of the market at present because of the deposit rules.
“It would mark a significant reversal of the trend in recent years whereby one policy decision after another has served to put home ownership beyond the reach of many. The Central Bank rules on mortgage lending, together with a market value based property tax and the abolition of mortgage interest relief, is resulting the in the odds being stacked against aspiring home buyers in Ireland.
“By contrast the government has actively facilitated and supported the purchase of Irish residential property by vulture funds at the expense of prospective home buyers in Ireland. This has been done through attractive capital gains tax relief on property investment and an attractive tax regime for vehicles such as Real Estate Investment Trusts.”