A chara, – The new mortgage lending rules are a gift to first-time buyers. While some complain about how difficult it will be to save up a deposit, they ignore the fact that these measures are a hammer blow to high property valuations. Prices will fall, therefore deposits and mortgages will ultimately be substantially lower. While vested interests will kick and scream, the subsequent smaller mortgages will be a boon for the small business sector as more disposable income will be spent in the real economy instead of servicing debt. – Is mise,
ALAN W LALLY,
Dublin 4.
Sir, – The recent announcement of proposed changes to residential mortgage lending is necessary and welcome, even if it is a little late. The lack of action from the Central Bank during the last crisis was a major contributory factor to the disaster that ensured and it would be inexcusable for the authorities to just sit on the sidelines again, watching the predictable chaos coming down the tracks in the absence of any meaningful policy initiatives.
However, the combination of a 20 per cent deposit, together with a 3.5 times earnings limit, is very onerous and this will place a huge burden on first-time buyers. The imposition of these restrictive measures on what to date has been little more than a “wild west” housing market will cause almost as many problems as it solves unless careful thought is given to the challenging position in which these first-time buyers will find themselves.
The private rental sector is insufficiently regulated to absorb the large numbers of 20 and 30 year olds who cannot afford to buy, and the last thing we need is to create conditions which attract the type of amateur landlords who are chasing a fast buck. The best type of landlord invests for the long term and is much more focused on sustainable rental income rather than short-term capital gain. Unfortunately, we still have too many of the former and not nearly enough of the latter. This is a problem if the policies we adopt force tens of thousands more into the rental market.
There is still time to reduce the impact of these necessary measures with a little simple but creative thinking. These aspiring first-time buyers do not deserve to be frozen out of home ownership and the Government has a responsibility to help them. The vast majority of them are in the relatively early stages of their careers and did not participate in the obscene financial feeding frenzy that preceded the economic and housing market crash. They should not be made victims for the past mistakes of others.
One simple suggestion I would make is the introduction of a first-time house buyer’s savings plan. These plans could be modelled on the popular and long-standing ISA accounts in the UK and could very easily be used to allow prospective first-time buyers to invest a capped amount of their gross income each year. Deposit interest or investment growth within these accounts should also be tax exempt but with a “clawback” condition which would reclaim any tax relief and tax-free growth if the proceeds were not used as all or part of the deposit for a home.
This creative measure would give some certainty to vulnerable young taxpayers as it would allow them to plan for their future. Of course, it would still take some years for them to accumulate their deposit but they would at least feel that home ownership was achievable. The alternative “do nothing” approach would be disastrous and would amount to a betrayal of this generation. Any Government that took this brave step would also reap the rewards as every one of these individuals has a vote and knows how to use it. – Yours, etc,
MAURICE McCANN,
Killiney,
Co Dublin.
Sir, – The response of would-be buyers to the Central Bank’s mortgage proposals is truly baffling and short-sighted. It seems that would-be buyers are still trapped in the mentality of “If I can just have more credit I can get my dream home” – ignoring that a general increase in credit only serves to push up prices for all. During the boom, every change to stamp duty thresholds served to disadvantage those whom it was intended to help.
The straw man of cash-rich buy-to-let landlords buying everything has also been trotted out without any data to support the assertions made. Sceptics also gloss over the fact that new mortgage rules are even tighter for this investor cohort – many of whom are unlikely to qualify for mortgages anyway given their current investments – not to mention the changes in tax treatment for rental income (increased PRSI and reduced interest deductions).
Former US Federal Reserve chairman William McChesney Martin famously described his job as “taking away the punch bowl just as the party gets going”. It seems some people just want to keep drinking and forget about the hangover. – Yours, etc,
PAUL KEAN,
Dublin 8.