Central Bank must see sense on prohibitive 20% mortgage deposit proposal – McFadden

Fine Gael Longford/Westmeath TD, Gabrielle McFadden, has said that substantial rent being paid over many years by young people hoping to eventually buy a house must be considered as a part of any new mortgage application rules instead of what she described as the prohibitive 20% deposit proposal being mooted.

Deputy McFadden has expressed her grave concerns about a proposal to force young people to come up with a 20% deposit before they can be considered for mortgage approval.

“Young people in their late twenties and thirties currently paying rent of €800 plus a month for many years will never be able get on the property ladder if they are being forced to come up with a 20% deposit under new rules being proposed by the Central Bank. How can we expect a young person or a young couple to ever save for a deposit when at the same time, they are paying exorbitant rent.

“Essentially, what these young people are doing is paying someone else’s mortgage when they should be paying their own.

“I believe that if a young person has a good track record of paying significant rent over a 5 to 7 year period for example, that proven ability to pay should have considerable value. In this context, that should mean they only have to pay a ten per cent deposit when applying for a first-time mortgage.

“In some instances, the rent being paid by young people is the equivalent of monthly mortgage repayments and a proven history of a someone’s good track record in paying such rent has to stand for something when he or she then wants to apply for a mortgage.

“Of course no-one wants to go back to the days of the property bubble under the last Government but this new 20% rule, if it goes ahead, is punishing young people who had no hand, act or part in the crash. What it will do is stop many young people in urban and rural areas from ever being able to afford to own their own homes.

“The remarks made yesterday by the Central Bank of Ireland Governor Patrick Honohan seem to suggest that the thinking is very much in favour of introducing the 20% rule. However, it’s clear that not all top officials are backing this proposal. Yesterday the Department of Finance rightly described this proposal as not “socially acceptable” saying that it shouldn’t just be people whose parents who can give them a big lump sum for a deposit who can get on the property ladder.

“I would appeal to the Governor and the relevant decision-makers to again think long and hard of the consequences of introducing such a prohibitive rule for young people dreaming of securing their first home.”