THE GOVERNMENT'S new "Homechoice" loan scheme for first-time house purchasers is being challenged in Brussels on the basis that it is confined to newly-built homes and excludes second-hand and self-build houses.
More than 250 people have lodged a formal complaint to the European Commission's Directorate-General for Competition, claiming that the scheme is anti-competitive and constitutes "unlawful State aid" to property developers.
The complainants got together online through the propertypin.com website, where Homechoice was characterised as a "builders' bailout" plan designed specifically to facilitate developers with a large volume of unsold new homes.
They claim that the scheme, which is to be operated by the Housing Finance Agency (HFA), would distort the free functioning of the residential housing market in favour of new-build houses and apartments, effectively subsidising developers.
"The central condition underlining the operation and rationale of this scheme is that only new-build dwellings qualify for the provision of subsidised mortgage finance - to the exclusion of the second-hand and self-build segments of the housing market."
The complainants say the impact of these restrictions is that "certain defined vendors" are favoured to the exclusion of others.
They say this is "for no other reason than that this scheme has been designed from the outset to advantage a defined cohort of vendors".
They claim that the scheme also "has the potential to distort competition and trade between [EU] member states and is therefore incompatible with the common market" because mortgages obtained from foreign banks would not qualify.
These "adversely affected entities" include Ulster Bank and First Active (which are owned by Royal Bank of Scotland, UK), Halifax Bank of Scotland, KBC Bank Ireland (formerly IIB, whose parent is KBC Group in Belgium) and National Irish Bank (owned by Danske Bank, Denmark).
"The HFA-provided mortgages will have a competitive advantage in this marketplace due to the fact that the HFA, as a State body, can access finance in the marketplace cheaper than other competitor mortgage providers," the complaint states.
Traditionally, Government grants to first-time house purchasers - which were abolished in 2002 - were limited to newly-built homes, to the exclusion of second-hand houses.
However, this restriction was never challenged by any complaint lodged with the European Commission.
