Tight restrictions to be placed on support for first-time buyers

Data on recovery of mortgage-backed purchases sparks fear of fuelling bubble

The Coalition is trying to avoid any inadvertent boost to the property market through support for first-time buyers

The Coalition is trying to avoid any inadvertent boost to the property market through support for first-time buyers


The Government is likely to place tight restrictions on any intervention in the property market to support first-time home buyers.

While the Department of Finance has been examining the merits of a special scheme to support new buyers since May, data which points to a deepening of the recovery in the property market has raised questions.

There is concern in Coalition circles to avoid any inadvertent boost to the market, although sources familiar with the thinking in the department said a proposal for the State to guarantee a portion of a first-time mortgage to encourage lending remains.

The idea is to boost new house buyers’ creditworthiness in situations where they might have saved enough for a 10 per cent deposit but where lenders seek 20 per cent.

Construction sector

Minister for Finance Michael Noonan is to brief the Cabinet early next month on an analysis of the measure, which was the big talking point of the Government’s plan to revive the construction sector.

“Action 51 of the [construction] strategy contains a commitment to examine international best practice for models of mortgage financing in Ireland to ensure sustainable levels of mortgage lending. A mortgage insurance scheme is just one such measure,” said a spokesman. “A report on ensuring sustainable levels of mortgage lending will be presented to the Cabinet committee on mortgage arrears and credit availability by November . . .”

Restrictive measures

A blanket initiative to help all first-time buyers in new developments has been ruled out, it is understood. It is further understood any new measures would be highly restrictive .

“Any market intervention has to be extremely prudent and cautious, if there is to be one,” said a senior Government source. When the Government published the plan, it dismissed claims new measures to kickstart the sector would lead to another bubble.

The Government’s increasingly cautious stance follows the publication of data this week which points to increased mortgage availability, as the level of cash transactions moderates.

The Society of Chartered Surveyors Ireland found cash buyers accounted for little more than one in three property purchases in the second quarter of 2014, down from 50 per cent the previous quarter.

A further consideration for the Government is that house prices outside Dublin are rising at their fastest rate for seven years, suggesting the recovery is no longer confined to the capital.

With prices rising rapidly in Dublin, there is concern to avoid any measure which would drive prices higher.