Government to fund low-interest mortgage scheme

The Government has unveiled a new scheme of local authority mortgages that will be available from next week.

Minister for Housing Eoghan Murphy outlined details of the Rebuilding Ireland Home Loan scheme to the housing summit of local authority managers in Dublin on Monday. Under the scheme, the Government will finance local authorities to provide mortgages to people who have been turned down by banks.

The low-interest rate mortgages will be available to purchasers of properties worth up to €320,000 in the greater Dublin area, Cork and Galway, while the ceiling in the rest of the country will be €250,000.

The scheme will be reserved for borrowers with an annual gross income of no more than €50,000, or €75,000 for couples. Central Bank rules will apply so borrowers will be able to take a mortgage for 90 per cent of the property's value.

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Borrowers will be able to choose a fixed rate of 2-2.25 per cent over 25-30 years, terms unavailable from any bank.

The Government has set aside €200 million for the scheme this year, but it is understood more money is likely to made available next year if it is a success. The allocation for this year is expected to cover about 1,000 mortgages.

The loans can be used to purchase new and second-hand properties, or to finance the building of a home.

The scheme is to be targeted at people who have been turned down for mortgage approval by banks, though applicants will have to satisfy a prudential lending analysis to demonstrate they will be able to meet repayments. Applicants will have to show they have been turned down twice, or have two insufficient offers, from the banks.

The scheme will be opened on February 1st, while a website allowing potential borrowers to ascertain eligibility (rebuildingirelandhomeloan.ie) is live.

Homelessness

In his speech to the conference, the Minister defended the Government’s efforts to tackle homelessness. He said Government initiatives on the supply side would lead to the construction of more homes, and he highlighted other initiatives such as a new fast-track planning process for large developments; an infrastructure fund to open up land for development; new apartment guidelines that will allow more homes to be built on a site, while removing costs such as parking spaces where they are not needed; and a new State-funded bank to provide competitive loans for builders.

However, he acknowledged the Government also needs to help buyers and renters. Along with the local authority loans scheme, he announced details of a new affordable purchase scheme that will provide homes on State-owned land.

Under this scheme, councils will provide land at reduced or no cost and, once houses are built, the price will be discounted and the State will retain an equity share. Initial sites and funds have been provided.

A pilot project is under way to examine the feasibility of an affordable rental scheme that would provide low-cost rental units on State land.

Speaking ahead of the conference, Mr Murphy said the new local authority mortgage scheme would have a fixed rate for the entire life of the loan. “It takes all the risk out of it and offers greater flexibility.”

Speaking to RTÉ's Morning Ireland, he said he also planned to introduce a system of publishing monthly reports on how each local authority was doing in reaching housing targets.

“People will be able to see what is happening in their local authority and if it’s not meeting its target they can ask why. It’s about transparency and accountability.”