Brendan Burgess
Founder
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I have heard a few people say this on the radio recently, and I might include the point in an article I am writing.
The argument seems to be:
First time buyers can borrow up to 90% so they have an advantage over second time buyers who can borrow less if they are competing for the same house.
First time buyers get up to 5% of the price of a newly built house from the government, giving them more firepower than second time buyers.
It is difficult for existing house owners who want to trade up, to sell their homes as first time buyers will be more interested in new houses as they can get 5% of the cost back in tax.
Or the argument may be more general "nothing is being done for second time buyers who are stuck in unsuitable homes."
First of all, the 80% LTV limit is appropriate. Second time buyers should not be borrowing more than this. The lenders are allowed to make up to 20% exceptions, so a second time buyer with a good credit risk who wants to borrow up to 90% will get a mortgage. (Most second time borrowers need less than 80% so most who want an exception will get one if the bank wants to give it to them.)
Should FTBs be allowed to borrow up to 90%? The Central Bank claims that their research shows that FTBs default less often. If that is the case, then it's reasonable to lend them more than second time buyers.
They do have a point about the 5% grant to First Time Buyers of new houses. It would give FTBs an unfair advantage if competing for the same house. In my view, FTBs should be able to save the 10% deposit themselves without government help.
The overriding problem is the lack of building. And especially the lack of building of starter homes. It would have been much better to abolish VAT on all new builds, irrespective of the status of the buyer. That would have encouraged more building and would not have the discriminatory effect.
Brendan
The argument seems to be:
First time buyers can borrow up to 90% so they have an advantage over second time buyers who can borrow less if they are competing for the same house.
First time buyers get up to 5% of the price of a newly built house from the government, giving them more firepower than second time buyers.
It is difficult for existing house owners who want to trade up, to sell their homes as first time buyers will be more interested in new houses as they can get 5% of the cost back in tax.
Or the argument may be more general "nothing is being done for second time buyers who are stuck in unsuitable homes."
First of all, the 80% LTV limit is appropriate. Second time buyers should not be borrowing more than this. The lenders are allowed to make up to 20% exceptions, so a second time buyer with a good credit risk who wants to borrow up to 90% will get a mortgage. (Most second time borrowers need less than 80% so most who want an exception will get one if the bank wants to give it to them.)
Should FTBs be allowed to borrow up to 90%? The Central Bank claims that their research shows that FTBs default less often. If that is the case, then it's reasonable to lend them more than second time buyers.
They do have a point about the 5% grant to First Time Buyers of new houses. It would give FTBs an unfair advantage if competing for the same house. In my view, FTBs should be able to save the 10% deposit themselves without government help.
The overriding problem is the lack of building. And especially the lack of building of starter homes. It would have been much better to abolish VAT on all new builds, irrespective of the status of the buyer. That would have encouraged more building and would not have the discriminatory effect.
Brendan