A Fine Gael Senator has called for the Central Bank of Ireland to bring greater flexibility to its mortgage lending rules in order to assist first time buyers secure a home. Speaking in the Seanad this week Senator Barry Ward (Dún Laoghaire) raised the issue with the Minister for Finance and suggested the Central Bank change the mortgage interest rules, particularly as they relate to deposits required by first-time buyers.
Senator Ward said, “I am calling on the Central Bank to introduce flexibility in relation to who is considered to be a first-time buyer, specifically focussing on people who may be in a case of marital break-down or where they have had to leave the family home and buy a second home, and allowing them to avail of first-time buyers’ rates.
“I acknowledge the importance of borrowing controls; they are a necessary element of control to ensure we do not return to what happened in the Irish economy over a decade ago, but they are currently applied inconsistently.
“They include restrictions on the loan-to-value (LTV) and loan-to-income (LTI) rates to ensure that people are in a position to repay mortgages and not to default on them. In addition there are measures that allow second and subsequent buyers to only obtain a mortgage of 80% of the value of the property. However, special measures are in place for first-time buyers that allow them to get a mortgage of up to 90% of the value of a residential property.
“Where a relationship breaks down and one partner has to leave the family home, for example, the person leaving the home, who has to set up again, still has to find a 20% deposit. A couple buying a house, where one is a first-time buyer and one is a second-time buyer is also treated as a second-time buyer. There is a basis on which such people should qualify under the first-time buyer criteria.”
Acknowledging that the Central Bank rules have improved credit quality nationally, Senator Ward said that they have also led to a situation where many young people and those coming out of relationships that have broken down, find it incredibly difficult, if not impossible, to obtain a home mortgage.
“I welcome the ‘comprehensive review’ of the lending rules by the Central Bank. Very often, there are people for whom the rules are a major obstacle, and The Central Bank should examine if there are other categories of people, including those who have to start again and those whose relationships may have broken down, who could also be considered as first-time buyers for the purposes of the rules.
“Currently too many people are prevented from securing their home due to the application of these rules. Some flexibility would allow greater access to the mortgage market for some buyers.”