IPAV suggests mortgage terms of up to 50 years to help solve housing crisis

The Institute of Professional Auctioneers and Valuers (IPAV) has called for mortgage terms offered by banks to be extended for periods of up to 40 and 50 years to address the housing affordability crisis.

In a pre-budget submission, IPAV said the situation in Ireland’s housing market is at its “11th hour” with home ownership increasingly becoming the preserve of those on higher incomes. The consequences of this situation, IPAV chief executive Pat Davitt said, are likely to be “massive” and “adverse”, both socially and economically.

Fixed-term mortgages of up to 30 years are available in Ireland but many buyers opt for shorter-term loan periods because they pay less interest over the lifetime of the mortgage. Longer-term home loans cost borrowers more in the long run but reduce the size of monthly repayments making them more affordable in the near term for first-time buyers.

Unconvincing

Consumer advocates have hit out at the length of mortgage periods being offered by banks in Ireland, where mortgage rates are already higher than the rest of the euro zone.

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But IPAV said extending repayment periods even further could “address the current situation where home ownership has effectively become the almost exclusive preserve of those on higher incomes”.

“Aspiring homeowners, particularly those on average incomes, have seen their ambition thwarted by a number of factors — the financialisation of housing on a global basis; a lack of supply leading to continually increasing house prices; over-zealous mortgage lending rules; a turgid planning process and a failure to support SME builders,” Mr Davitt said.

“That these young people are paying rents that are substantially higher than mortgage payments would be, in virtually every area of the country, is a terrible indictment of where we’re at, not to mention in many cases delaying decisions around family formation and being forced to live longer with parents and in-laws.”

In its submission, IPAV has also called on the Government to extend the Help-to-Buy scheme for a further three years. It has also recommended that the scheme should have an income limit for qualification so that high-income households, such as those earning over €250,000, no longer qualify for the scheme.

IPAV has called for a common income tax rate of 25 per cent for both large and small landlords and a reduction in VAT on new homes from 13.5 per cent to 5 per cent for at least five years.