Minister for Finance Michael Noonan has defended the Central Bank's mortgage rules and said the situation had "looked a little scary" early this year with concerns about a new property bubble.
Mr Noonan was responding to Fianna Fáil finance spokesman Michael McGrath, who said the rules requiring a 20 per cent deposit from those seeking a mortgage were having a significant impact on first-time buyers’ ability to purchase a home.
He also said it was impacting on the capacity of many families currently in unsuitable houses or apartments to trade up, because they were now subject to the full 20 per cent rule on properties above €220,000.
During Dáil finance questions, Mr McGrath warned that home ownership levels were going to fall: “These rules have put home ownership beyond the reach of many, despite their ability to repay a mortgage.” He called for deposits to be about 10 per cent, with the primary determinant being ability to pay.
Mr Noonan said the Central Bank had given its reasons for introducing new lending rules. "Housing prices, particularly in Dublin, were escalating rapidly at the time and the position looked a little scary just after Christmas last year," he said.
Mr Noonan said there was considerable newspaper commentary suggesting “we were heading straight back to a housing spiral, which would result in inflated housing prices, more people being in negative equity and another bust”.
He told the Cork South Central TD that “whether the Central Bank was right or wrong, there is no argument about the reasons it intervened. It did so because it feared another housing bubble which would lead to an economic collapse.”
The Minister said the Central Bank had the regulations under constant review. “If it believes the rules need to be modulated, I am sure it will act.” He said period of at least 12 months was needed to determine the effects of the measures.
Mr McGrath described the level of mortgage lending as exceptionally low. But Mr Noonan said there had been a 35 per cent increase in mortgage lending this year.
