100% mortgages would drive up house prices, Central Bank warns
Celtic Tiger-era 100% mortgages would drive up house prices and increase risks to borrowers and banks, the Central Bank has warned.
Mark Cassidy, the Central Bank's director of financial stability, warned TDs and senators at the Oireachtas housing committee against the return of 100% mortgages.
'We think that would be a bad idea,' Mr Cassidy said.
It would add to demand without any impact on supply and therefore add to prices.
'More fundamentally, it increases the risk for borrowers and for banks.'
Banks introduced 100% mortgages during the Celtic Tiger period, but more recent Central Bank rules do not allow either 100% or 95% mortgages to be given out.
Current rules require borrowers to have a 10% deposit in order to obtain a mortgage.
Mr Cassidy said reintroducing 100% mortgages would increase the risk of default, if a household's income fell. He added that, if house prices fall, homeowners would immediately fall into negative equity and would be likely to 'get into financial distress'.
'We believe a minimum of a 10% deposit remains necessary for either first time borrowers or existing borrowers,' he added.
'We would be confident that 100% mortgages are overly risky, both from the perspective of the borrower and the perspective of the bank.'
The matter was raised by a number of TDs and senators during the meeting, who questioned whether it would be possible to allow for the reintroduction of 100% mortgage products. It comes as Independent Ireland has called for the reintroduction of 100% mortgages, saying that many tenants are able to pay more in rent than they would need for monthly mortgage repayments.
The Central Bank was also critical of Government plans to consider expanding the First Home shared equity scheme to second-hand homes. Robert Kelly, the Central Bank's director of economics and statistics, warned against the measure.
'The challenge in front of us, it's mainly supply. The current scheme works through pushing up demand and house prices, creating more additional funding for them to buy houses so it stimulates supply.
'I don't see how applying that to the second-hand housing market would achieve that. I think the net effect of that would be additional demand, which would likely feed its way into house prices as opposed to creating large amounts of supply.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Irish Times
2 hours ago
- Irish Times
The Irish Times view on planning in Ireland: vital clarity must be restored
An Coimisiún Pleanála was quietly ushered into existence last week. The Minster for Housing, James Browne, formally established the body which has taken of the role of An Bord Pleanála, the previous appeals body for planning applications. It had lost the confidence of the public and the previous government amidst serious governance failures and lengthy planning delays. The establishment of the new commission comes as a worrying sense of drift envelopes this Government's efforts to address the seemingly intractable shortage of housing. The lengthy gestation of the new body is in itself evidence of a seeming lack of urgency. The Planning and Development Bill which created it was was first brought before the Dáil in November 2023, but was only passed by the Oireachtas last October. That was an inexcusably long time, even allowing for committee debate. It took another six months for the minster to commence the section relating to the planning commission. Many other measures remain to be commenced. The costs of such delay are clear for all to see. The latest figures from the Central Statistics Office - published last Friday - show that residential construction activity is falling. READ MORE Paul Reid, a former head of both Fingal County Council and the Health Service Executive has been appointed chairman of the governing body of the new commission. He would seem well qualified to meet the challenges of leading the new body. The biggest is restoring public, political and industry confidence in the speed and clarity of the planning process which rightly carries much of the blame for the housing shortage. The new statutory targets that have now been set for decisions on planning cases including critical infrastructure projects for transport, water, grid and energy as well large-scale residential developments , need to be met. For that to happen the new body will have to get the resources it needs when it needs them. If it doesn't, then the new commission risks being seen as little more than old wine in a new bottle.
Irish Examiner
3 hours ago
- Irish Examiner
Security at sites for refugees' modular homes cost almost €1m
Almost €1m was spent on enhanced security at six sites where modular houses for Ukrainian refugees were to be built, new documents show. The Office of Public Works (OPW) has outlined there was a total cost of €942,305 to provide security services to sites for modular homes. The costs are associated with the construction of 246 modular homes across the country, including the 64 units at a site in Mahon in Cork City. In documents provided to the Oireachtas public accounts committee, the OPW says there was a need for 'additional security requirements over and above the usual allowance' due to what it described as 'socio-political sensitivity'. The enhanced security included a requirement for security personnel to be on hand 24 hours a day, until it was 50% occupied. Other significant costs were incurred by the OPW while developing the six sites, through what were described as 'site abnormals'. In total, there was a bill of €7,654,236 across all six sites. This included the removal of Japanese knotweed at the Mahon site, with 'significant amounts' of the invasive plant found on multiple locations in the area. The OPW said this caused delays to the project and necessitated the employment of a specialist ecologist to 'survey the site, put together a treatment plan and monitor all works associated with the removal of the knotweed'. This included boundary works to prevent further spread of the weed. The overall cost at Mahon for abnormal site issues was €1,263,850. The most expensive place for site abnormals was in Rathdowney — €2,440,000 — where builders discovered early in the process the ground conditions were 'not optimal for delivering a housing development' due to its soil type and close-to-surface groundwater.
Irish Independent
20 hours ago
- Irish Independent
Owners of defective Celtic Tiger-era apartments believe it will take another 10 years for homes to be fixed
Owners of defective Celtic Tiger-era apartments expect it will take another 10 years for all of their homes to be repaired under a delayed €2.5bn state scheme.
