7 years doesn’t seem like a long time but upon reading headlines it’s long enough for Ireland to forget about the pain we have experienced through property. Last year we saw property prices rise by 16.3%, albeit from a very low base and the majority of the growth seen in Dublin according to recent figures. So the boom is back?

However this time will be different or will it?

The central bank have made it clear this time that they are going to intervene to curb the level of growth within the property market. Nothing is yet written in stone but the latest proposals focus predominantly around a ‘20% deposit’ and a limit of ‘3.5 times salary’ borrowing limit.

Example: To buy a house for €300,000 you would need €60,000 as a deposit.

Why this measure?

The central bank (Research driven) believe that losses are much higher and the risk is greater where borrowers have a high LTV. Lending at high LTV was a feature of the last crisis. Under the proposed measure the LTV will be lower and in turn providing additional protection for banks.

Public reaction?

Like potential buyers banks and politicians are not too happy with this proposal and have made it public that an alternative proposal should be put together. In an unlikely turn of events, the banks have begun to challenge the central bank and now they have a real fight on their hands. Both Bank of Ireland and Permanent TSB have implemented significant interest rate cuts to both fixed and variable rate mortgages in an effort to get new home buyers in the door before the proposed lending restrictions are implemented.

Enda Kenny has gone as far as threatening to introduce a mortgage indemnity scheme that would effectively override the plans to establish minimum deposit levels.

What should you do?

It is still all very much up in the air with the finalised decision expected imminently. The reality is that under this new measure home ownership for the average family would become virtually impossible and the property market will be left open to wealthy speculators and investors.

Yes we have seen the banks reduce the rates but this comes long after the main ECB rates were reduced. As much as they like to you to think they are acting in your best interests they are still charging well over the odds.

If the measure is introduced we are inevitably going to see a slight reduction in the pace of house price increases and rent prices may even increase as the number of people forced to remain in rented accommodation will be maintained.



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