Central Bank rules on mortgage lending have been changed? I thought the rules were still new?
They sort of are. The Central Bank rolled out new rules restricting the amounts banks could lend to would-be homebuyers less than two years ago but said at the time that they would be up for review and that is what has happened.
Has anything major come out of this review?
Again, sort of. But it does depend on who you are and where you are on the property ladder or if you are on it at all.
What do you mean by that?
The big change has been for first-time buyers. From January of next year, the ceiling on the loan-to-value (LTV) ratio for all first-time buyers will be set at 90 per cent. The ceiling for first-time buyers now is 90 per cent for loans up to €220,000 and 80 per cent for the balance.
What does that mean in terms of hard cash?
A lot. Today, if a first-time buyer buys a house worth €400,000 they need a 10 per cent deposit on the first €220,000 – €22,000 – and a 20 per cent deposit on the remaining €180,000 – €36,000. That means a person buying a €400,000 house needs a total of €58,000.
On January 1st, the same buyer will need a deposit of €40,000, €18,000 less.
That is a big deal, what impact will it have?
It will allow more first-time buyers to get on the property ladder faster.
Where does the help-to-buy scheme fit in to all this?
Ah yes, the help-to-buy scheme, we nearly forgot the initiative to help first-time buyers announced by Michael Noonan in the budget.
Under it, the Government offers first-time buyers tax rebates of up to €20,000 on new homes valued up to €500,000.
From Irish Times 24 November
