Fine Gael TD for Kildare South Martin Heydon is today (Friday) urging members of the public to have their say on new proposals for mortgage lending from the Central Bank. Deputy Heydon was speaking after it emerged that the EU Commission has backed the Central Bank’s proposals to set mandatory deposits of 20% for home buyers.
“A Public Consultation process on the Central Banks controversial proposals is currently ongoing and the Central Bank have confirmed today that the Bank would be considering all responses to the plans. A Central Bank spokesperson said the Troika’s views would be an important part of the consultation process but stressed that its views are just one response that the bank will be considering as part of the overall consultation process.
“I myself have reservations about a blanket 20% deposit requirement. The focus should always be on proper stress tests of potential homeowners to see if they will be able to make payments well into the future. A 20% deposit requirement does not necessarily reflect a persons ability to repay a mortgage. Those who could borrow money for the deposit from a family member to show they have the required 20% deposit would do so. Would we have a scenario where those with well-off family members are at a distinct advantage?
“Right now, the banks impose stress tests on applicants using the Central Bank dictated rule of a 2% addition to the variable rate. This is to ensure that customers can continue to make payments in the event of a 2% increase in rates. A fairer and more accurate approach would be to reduce the requirement for a 20% deposit and increase the stress test application to 3% over the variable rate. This is the real test of a sustainable mortgage and is a more sensible solution and way forward for those who wish to own their own home.
“If the Central Bank proposals to impose 20% mortgage deposits are introduced, many young people will have to postpone buying their home until they have the necessary deposit saved. The value of the property, may go up by between 10- 15% in this time, which adds to the mortgage costs in the long run. I do not want to see any system that would walk people into unsustainable mortgages but we must ensure that regulation imposed by the Central Bank is sensible and fair to young people who are simply trying to own their own home.
“I would urge all those with an interest in this area to read the central bank proposals and make a submission to realestate@centralbank.ie
The Central Bank Proposals can be accessed at the following link: