Independent Ireland calls for reintroduction of 100% mortgages for first time buyers - but politicians urge caution"

POLITICAL PARTY INDEPENDENT Ireland has called for banks to reintroduce 100% mortgages to the market to help renters and young people buy their first home.

It comes as the product, synonymous with the Celtic Tiger era, has increased in popularity in the UK.

In Ireland, however, 100% and 95% mortgages are not available under Central Bank lending rules that came into force in 2015.

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Yes, because increasing the funds available to purchase houses is sure to fix a supply problem.

This is how you bid up house prices even further, people. We need policies that will increase the supply of housing, not the demand for housing.

All the other politicians quoted in the article said it was a bad idea.

And even if they all supported the idea, the Central Bank would not allow it.

This is not the answer to the problem.

One of the main house builders was asking for VAT to be done away with to make houses more affordable. At this stage, it is a solution I would not dismiss. Or else reduce the BER on some homes to make them cheaper to build.

But putting the homeowners at greater risk will not solve any problems.

Taking vat off will not solve the problem, Lots of buyers are buying up to the max they can borrow,
Builders will Build bigger/dearer houses and possibly Build less houses,
Anyhow vat is already been returned with the help to buy scheme,
if you look at the price of secondhand houses it is set by how much people can borrow,
It may be an Idea to ring fence vat from house building into creating new green field serviced sites for small builders like it was in the 1970/80,

!00% mortgages will just push up the price of secondhand houses further,driving people on lower wages to over extend and repeat the mistakes of the past,

Realistically how many potential FTBs would this actually even impact/benefit?

It's a competitive market, prices are high. In theory it might bring more FTBs to the market sooner but even then the State ponies up most of the deposit through the various FTB supports.

If I can't afford to buy at 4x + a deposit, I'm not going to be able to afford to buy at just 4x!

Steven Barrett said:

But putting the homeowners at greater risk will not solve any problems.

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That is very blinkered thinking. A person renting with (effectively and regardless of what the law suggests) zero security of tenure is not in a better situation than a homeowner with negative equity. For those who want to sell, the days when negative equity meant 12 years in purgatory/bankruptsy are well gone. And for those who want to keep their negative equity homes, they have certainty of cost.

Also, if prices crashed again like in 2008, a 10% deposit will be worthless to the homeowner who bought in the several years prior to the peak.

That said, handing out 100% mortgages to anyone with a heartbeat would be crazy. Robust credit & affordability checks are essential. 95% mortgages might be a more reasonable ask.

Brendan Burgess said:

And even if they all supported the idea, the Central Bank would not allow it.

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Absolutely. We now have a fully independent Central Bank that sets policies. And governments don't get to meddle, whether its correct or not.
Having a minimum deposit isn't a bad thing - the question is what the minimum should be - pre-boom it was typically 8%. 10% seems about right. In practice I think I read recently that the actual deposit paid in most cases is a lot more - closer to 20%.

Hello,

I would not support the idea of 100% mortgages.

I also wouldn't support the suggestion of removing VAT, as I would not trust the builders / developers (I suspect they'd increase prices, to increase profits).

The obvious solution is to build more houses and more apartments. I know we've had lots of excuses as to why we can't seem to do this, but there's a solution for every one of those excuses, if our Government actually wanted to solve the housing issue.

I'd also support the idea of lending more money to younger borrowers, by way of a longer term homeloan, so as to help them buy a home. I've no issue with giving out 40 - 45 year homeloans to (say) 25-year olds, in stable employment. That would increase their borrowing capacity, while they'd subsequently have the option to speed up repayments and shorten the term of the loan, as their incomes increased.

MrEarl said:

I also wouldn't support the suggestion of removing VAT, as I would not trust the builders / developers (I suspect they'd increase prices, to increase profits).

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You dont need to 'trust' developers to do anything........you just need to trust that economic participants seeing high profit margins & high returns on equity would enter the housing development business......in effect driving down the abnormally high profits for the incumbents in the medium and long term....leaving you with elevated supply which is whats needed.

Step one in this equation....which Irish begrudgery seems unable to bear....is that to solve the housing crisis definitively once and for all might require a short period of time (perhaps a couple of years) where incumbent developers make out like bandits......"

Warren Buffett: “It is not greed that drives the world but envy.”

Human nature is such that abnormally high housing construction profits would be looked at enviously by others and many more participants would enter the space.....domestic & international financial and human capital.

You can't believe the ingenuity & work ethic of human beings when presented with outsized rewards. Its time to make homebuilding in Ireland one of the most profitable activities for human and financial capital in the State. Shouldn't the highest economic rewards go to those solving the most pressing societal problems of the day? I think so.

Dont we have a perfect contra example to the above. The government blew up the PRS sector by capping rent increases at 2% and are living with consequences of that now as PRS delivery falls to almost ZERO this year.

Whats clear as Ireland heads for a pathetic ~23,000 housing completions in 2025 is that the politicians have forgotten the most important lesson about homo-economics and that he responds to incentives.

There's a disturbing amount of basic economic illiteracy among Irish politicians. That includes cabinet ministers and has been a major factor in causing the housing crisis in the first place. People in charge of multi-billion budgets lack core Leaving Cert economics skills.

I have given up trying to keep this on topic.

When someone proposes 100% mortgages, it should not be used for yet another discussion on housing. Read the thread title and ask if your post and all of your post is directly relevant.