The Central Bank is to make a decision in November on whether the banks can participate in the Government’s proposed shared-equity housing scheme. They are considering “the interaction” between its mortgage rules and the Government’s proposed scheme.
Housing Minister Darragh O’Brien was forced to clear up his remarks after opposition parties accused him of “misleading” the Dáil when he said in June that the scheme had been “passed” and “received approval” from the Central Bank.
It can now be revealed that the Central Bank will make a decision on the scheme in November.
The Government set aside €75 million in Budget 2021 for the initiative. This involves the State paying for up to 30 per cent of the cost of new homes in return for a stake in the property. The banks are also expected to underwrite part of the scheme.
The only issue is whether that would leave them in breach of the current mortgage rules, which curtail lending by banks above certain thresholds.
The mortgage lending rules restrict buyers from borrowing more than 3.5 times their annual salary or, in the case of second-time buyers, from borrowing more than 80 per cent of the value of the property. However, a certain portion of bank lending is exempt from the rules.
The Central Bank expressed reservations about the scheme, noting it could be inflationary and may encourage participants to take on too much debt. They also noted that the scheme and other secondary housing-support measures only focused on specific financial aspects of the housing problem “but fundamentally the supply deficit is what needs to be addressed”.