Rent Should Be A Factor In Central Bank Mortgage Deposit Rules

James Lawless NaasI support calls today from party colleague and finance spokesperson Michael McGrath that the Central Bank rules on mortgage lending, in place since February of last year, need to be reviewed to examine the impact they are having on the ability of young couples and individuals to purchase their first home. In particular, he is calling for the rules to be modified in order that an established track record of paying rent is taken as evidence of ability to service a mortgage.

A survey carried out by last September found that it was cheaper to buy rather than to rent in 43 out of 54 areas covered by the survey. This means that, in up to 80% of the country, individuals and couples would actually be financially better off on a monthly basis paying a mortgage than paying rent for an equivalent property. In Kildare the average rent for a 3 bed house is €933 whereas to buy would cost between approx. €676 & €846*.

These people are now caught in a catch 22 situation whereby they would have lower monthly outgoings as a result of buying a house compared to renting but the monthly burden of their rental payment is severely restricting their ability to save the deposit they need. Under present rules, an aspiring home buyer living at home with parents is in a far stronger position to save for a deposit than someone renting privately. The mortgage deposit rules have to take some account of this.

In our election manifesto, Fianna Fáil will be putting forward a proposal which will establish a state top-up of 25% for regular savers who are putting money aside for a deposit. This will be a significant help to home buyers over the medium term but we also need to do something to help those potential home buyers who have shown clear capacity to pay a mortgage but are restricted in their ability to save for a deposit by high rents. This is a particular problem in urban areas where the rental crisis is most acute.

Availability of rental homes is at the lowest level on record, at just over 4,000 nationwide, there were fewer homes available to rent on November 1 that any point in the past ten years ago. We are suggesting that the Central Bank examine the potential of allowing up to 25 per cent of the deposit requirement for a first time buyer be met by taking in to account rent payments over the previous 3 years. This could potentially open up home ownership to a considerable cohort of people who have proven their ability to meet a monthly mortgage but are effectively shut out of the market at present because of the deposit rules.

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