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Mortgage change rules to 'boost purchasing power' of renters

The share of renters that can purchase a three-bed semi-detached home in Dublin has fallen since 2015, says the Central Bank.

HOUSING MINISTER DARRAGH O’Brien has said the new mortgage lending rules will see more renters able to buy their own home. 

The Central Bank announced yesterday that the mortgage borrowing limit for first-time buyers is to increase to four times their gross income from January 2023. 

The new rules will see the limits for first-time buyers rise from three-and-a-half times gross income, which had been in place since 2015.

The changes also mean that deposits of 10% of a home’s value are now required for both first and second-time buyers.

In its assessment of the impact of the new measures, the Central Bank said that increasing the borrowing limits from 3.5 to four will give an “immediate boost to purchasing power” of renters. 

Minister says more renters will be able to buy

Commenting on the mortgage rules, O’Brien told The Journal that “the changes made by the Central Bank to their mortgage measures framework will see more renters, who are currently paying high rents, being able to pay down a mortgage on a home, many at a monthly repayment which is lower than the rent they pay”.

“Every single independent survey shows that the overwhelming majority of renters want to own their own home. We know we need to increase the supply of homes, we need to give people options and that’s what we’re doing through Housing for All,” he said. 

The Central Bank estimates that, if applied to properties sold in 2021, an increase in the first-time-buyers loan limit to four “would have restored the share of renters able to purchase the median property sold to 2015 levels”.

Looking at viable levels of demand for new housing, the Central Bank said its methodology suggests that the share of renters that can purchase a three-bed semi-detached home in Dublin has fallen since 2015. 

The methodology also estimates that the increase to four times a person’s income for first-time-buyers will increase the buying power “to around the level experienced in 2015″.  

However, the Central Bank noted that its methodology deals only with the immediate boost to purchasing power, and does not model the possibility that the price-to-income ratio will also adjust across the economy, which the bank said could “offset some of the gains experienced by potential purchasers”.  

The Banking & Payments Federation Ireland (BPFI) Chief Executive Brian Hayes said with the rule change the Central Bank referred to how the measures would increase renters purchasing capacity.

He said there is a “mismatch” as many renters are paying high rental rates and could afford to get a mortgage that would be “significantly less”. 

“So is that the question the Central Bank is addressing? It clearly is,” said Hayes.

Central Bank Governor Gabriel Maklouf said yesterday that the rental market is a very difficult situation that people are dealing with, reiterating that the core issue is around the supply of housing, including in the rental sector. 

Maklouf also said during a briefing on the new measures that someone’s track record of paying rent should also be taken into account when they are applying for a mortgage.

“It is not new advice,” he said. 

“A prudent lender should be doing that already as part of their own assessments,” he said.  

A survey in August revealed that two-thirds of prospective renters believe the current rise in the cost of living has affected their ability to rent a home. 

The survey of 2,861 people, carried out property website MyHome.ie, suggests that the cost-of-living crisis is having a significant effect on the home buying, home renovation and rental markets.

Of those surveyed, almost half (49%) of homebuyers said the rise in the cost of living has affected their ability to buy a property, while 63% of prospective renters said the current crunch has affected their ability to rent.

Meanwhile a survey last month by a survey by consumer advocacy group Taxback.com found that nearly one-third of people (30%) said stricter rent controls would help first-time buyers striving to buy their own home because it would make it easier for them to save up for a deposit, while 24% believed a loosening of mortgage lending rules would have a positive impact.

While the measures have been welcomed by the minister, a number of concerns have also been raised by others in relation to the rule changes pushing up house prices.

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    Mute Finnster
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    Oct 20th 2022, 6:36 AM

    Mortgage change rules to boost profits of auctioneers

    279
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    Mute Brendan Gordon
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    Oct 20th 2022, 6:36 AM

    More like boosting the earning power of developers

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    Mute Kay Lennon
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    Oct 20th 2022, 6:52 AM

    Push buyers into bigger debt, higher interest rates … people will lose their homes again..shocking

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    Mute Paul Cunningham
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    Oct 20th 2022, 6:51 AM

    FFG learning nothing from the Celtic Tiger bubble.

    242
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    Mute NotMyIreland
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    Oct 20th 2022, 7:28 AM

    @Paul Cunningham: firstly the central bank are not “FFG”. Its an independent body. Secondly the new rules are far far tighter than during the Celtic tiger.

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    Mute Frank Gooding
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    Oct 20th 2022, 8:05 AM

    @NotMyIreland: OK dara.

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    Mute Colette Byrne
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    Oct 20th 2022, 9:46 AM

    @NotMyIreland:

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    Mute Frank Cauldhame
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    Oct 20th 2022, 1:00 PM

    @NotMyIreland: FF allowed our banks to lend with reckless abandon in the 90′/00′s despite being warned by leading economists that unless they take action to slow everything down we would face economic meltdown but Bertie Ahern rebuffed this sage advice and venomously suggested that those very same economists commit suicide Do you deny there was a bank bailout ?

    47
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    Mute Liam Collins
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    Oct 20th 2022, 6:51 AM

    I would of thought meant more competition for limited supply would drive up prices but could be wrong

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    Mute Mick McGuinness
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    Oct 20th 2022, 7:03 AM

    Block Vulture Fund’s from buy whole blocks of apartments and rows of houses in New estate’s. Otherwise buyer’s still have two hope Bob Hope and no hope.

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    Mute Karl Phillips
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    Oct 20th 2022, 9:50 AM

    @Mick McGuinness: Stop foreign investors buying whole blocks of Appartments ( like our Russian friends.) Wonder were that money is coming from.

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    Mute Paul Gorry
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    Oct 20th 2022, 6:58 AM

    O,Brien is a spoofer

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    Mute David Corrigan
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    Oct 20th 2022, 10:45 AM

    @Paul Gorry: Our very own Del Trotter.

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    Mute Frank Cauldhame
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    Oct 20th 2022, 1:12 PM

    @David Corrigan: Arfur Daly

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    Mute Deirdre Moffat
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    Oct 20th 2022, 7:51 AM

    Will this not just drive up property prices again?? Demand for housing is still outstripping supply.

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    Mute M
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    Oct 20th 2022, 7:44 AM

    Im sorry but this does not improve ordinary people a better chance of owning their own property. 4 time your gross earnings would suggest a wage of €110k plus to buy a smaller average house.

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    Mute Craic_a_tower
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    Oct 20th 2022, 8:37 AM

    @M: or two salaries of 55k but you are talking about €440k property which is above the average property.

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    Mute Mark Walsh
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    Oct 20th 2022, 10:48 AM

    @M: ahhhhhhh people do live outside the pale you know

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    Mute Sean Partidge
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    Oct 20th 2022, 8:29 AM

    Can’t help but find this is mad. The dogs on street know the house prices will rise parallel with this just like it did with the ‘help to buy’. What’s being suggested is to lend people even more money to people during a time of rapid inflation and suspected mortgage interest rates.

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    Mute Sean Partidge
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    Oct 20th 2022, 10:21 AM

    @Sean Partidge: rising* mortgage interest rates

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    Mute Colm Molloy
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    Oct 20th 2022, 6:50 AM

    This is normal no?
    As a society ‘develops’ we need a bigger multiple of earnings to buy.
    In 10 years it will be 4.5 and in 25 years maybe 6 times.
    Open to corrections as by no means an expert.
    Having said that, this creates more buyers for an already short stock so prices probably go up on the back of it.
    Can we go up a floor or 2 in all the town’s and cities residential buildings and make more living spaces that way ?

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    Mute Steve O'Hara-Smith
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    Oct 20th 2022, 8:54 AM

    @Colm Molloy: It certainly should not be that way.

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    Mute Mark Walsh
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    Oct 20th 2022, 10:47 AM

    @Steve O’Hara-Smith:
    Why not Steve O’ Hara-Smith ‘ most European cities have got it right ‘ Live & Work in the cities ‘ less commuting ‘ less pollution’ less traffic congestion’ more night time economy

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    Mute ChronicAnxiety
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    Oct 20th 2022, 7:53 AM

    Just as prices were stabilising/decreasing- interesting move.

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    Mute M Bowe
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    Oct 20th 2022, 8:57 AM

    So now the developers can gouge another €30/40k

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    Mute Craic_a_tower
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    Oct 20th 2022, 10:57 AM

    @M Bowe: because people only buy new builds?

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    Mute Dave Barrett
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    Oct 20th 2022, 9:05 AM

    Boosts the chance of another crash.

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    Mute Karl Phillips
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    Oct 20th 2022, 9:48 AM

    Is there anything they can get right except their pensions, leaders allowance ( nice little earner) and their subsistence ( money for turning up remember that was being fiddled)

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    Mute Craic_a_tower
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    Oct 20th 2022, 11:00 AM

    @Karl Phillips: well they got it right that we need to put more money into pension and increase the age of retirement but backed away due to public dislike.

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    Mute Kieran
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    Oct 20th 2022, 7:18 AM

    So have they made it a guideline or a requirement that rental payment record should be used? If so, I am all for it, if not then how can someone prove savings of a mortgage amount to show they can pay whilst also paying more than that on rent which wouldn’t be accounted for.

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    Mute Craic_a_tower
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    Oct 20th 2022, 8:35 AM

    @Kieran: never really happen as it makes the landlord responsible for effectively vouching for a tenant. What happens when a landlord say they won’t provide the information or they will but they point out any delayed payments?

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    Mute Kieran
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    Oct 20th 2022, 9:27 AM

    @Craic_a_tower: why do you need the landlord vouching, surely a proven monthly payment in and around the same date to the same company or person and then a lease agreement and prove of no RTB case should be sufficient. Keep the landlord out of it cos there could be personal differences or some relationship breakdown over landlord lack of maintenance or vice versa

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    Mute Craic_a_tower
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    Oct 20th 2022, 10:55 AM

    @Kieran: because that is what the banks said they would need. Proof of money leaving an account doesn’t cut it for the banks. It may make sense to you but not how such legal and financial practices work. They won’t change that just because you think it make sense.

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    Mute Oisin O'Connell
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    Oct 20th 2022, 8:00 AM

    Surely the solution is tax incentive schemes for builders, trades and new small investors. Ireland needs construction workers. Currently no big picture thinking by government and purely led by greed, the solution is build more, do it cheaply and incentive people back into building industry. Definitely all current scheme does is push up property prices and increase debt so more defaults!

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    Mute Colette Byrne
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    Oct 20th 2022, 9:45 AM

    Do they never learn, pushing up lending, won’t help, need to tackle profits of big builders, reduce costs, build more social housing with direct labour.
    It’s not rocket science.

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    Mute Craic_a_tower
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    Oct 20th 2022, 10:59 AM

    @Colette Byrne: I am sure you have this all thought out and considered everything. Let’s gauge, has the RPZ worked in providing more or less housing?

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    Mute Steve O'Hara-Smith
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    Oct 20th 2022, 8:52 AM

    Sure it boosts the purchase power but only so long as those repayments can be kept up.

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