Expert calls for easing mortgage regulations to help young people

A leading economist has called for the country’s mortgage regulations to be relaxed to help young people climb the real estate ladder.

Jim Power said in a pre-budget filing for the Institute of Professional Auctioneers and Valuers (IPAV) that workers earning up to $ 60,000 a year should be allowed up to 4.5 times their annual income on a mortgage to borrow.

Currently, they can only borrow 3.5 times their salary.

A leading economist has called for the country’s mortgage rules to be relaxed to help young people climb the real estate ladder. Image: Shutterstock

Mr Power said such a move would “give hope to a large cohort of the younger generation” and “bring some equity to the market”.

Long-term fixed-rate mortgages should also become the norm as they protect borrowers from short-term interest rate volatility, the economist said.

Mr Power said the government should be aware of the social and economic implications of mortgage regulations, although it is not directly related to fiscal policy or budgetary process.

Mortgage rules for young peopleJim Power said in a pre-budget filing for the Institute of Professional Auctioneers and Valuers (IPAV) that workers earning up to $ 60,000 a year should be allowed up to 4.5 times their annual income on a mortgage to borrow. Image: Shutterstock

“It is now clear that the regulations in their current form are effectively excluding those with median incomes from the home market,” he said. “In an environment of historically low mortgage rates, potential average-income buyers, and in some parts of the country even relatively high-income buyers, may not be able to own a home and will be forced into an expensive and non-functioning rental market.”

The central bank, which put the rules in place in February 2015, said it would not comment on general submissions, but a spokesman said, “The review of the framework itself is ongoing.

“That won’t be finished until 2022 at the earliest.”

Mortgage rules for young peopleLong-term fixed-rate mortgages should also become the norm as they protect borrowers from short-term interest rate volatility, the economist said. Image: Shutterstock

The IPAV’s contribution argues that mortgage rules are sensible and prudent, but adjustments are needed if the rules had negative, unintended consequences.

“From the point of view of justice and fairness, the limitation of home ownership in many parts of the country to people with high incomes is neither acceptable nor sustainable,” it says.

“Making it easier for younger people to own their own home would ease the burden on the rental market.”

Mortgage rules for young peopleThe IPAV’s contribution argues that mortgage rules are sensible and prudent, but adjustments are needed if the rules had negative, unintended consequences. Image: Getty Images

IPAV boss Pat Davitt said: “It has been cheaper to take out a mortgage for some time than to pay the rent on a similar property.

“This is the case in every area of ​​the country, according to Daft.ie, in many areas essentially the same, with the only two exceptions the affluent districts of two Dublin locations, Dublin 4 and 6.

“Even in these atypical areas, servicing a mortgage is only marginally more expensive than paying rent.”

Housing activist David Hall of the Irish Mortgage Holders Organization said expanding credit to 4.5 times income was too much and would drive prices up. Image: Shutterstock

He added, “Those with average incomes are absent and their future financial security is at risk.”

The IPAV called for reduced VAT rates for new buildings and the introduction of other tax incentives.

Housing activist David Hall of the Irish Mortgage Holders Organization said expanding credit to 4.5 times income was too much and would drive prices up.

The IPAV called for reduced VAT rates for new buildings and the introduction of other tax incentives. Image: Shutterstock

He supported an increase to four times the income but said, “I think four and a half times could be quite a distance.

“We have to learn from the lessons of the past; a balance has to be found here. We cannot change rules that put people at risk and create debt because we cannot control a market and bring in more inventory. ‘

“Yes, the three and a half time rule is ridiculous and definitely needs to be checked, and the central bank is looking at that.” He added, however, that “building more houses is the only solution,” and said, “We do not want to drive up the price of building the houses either; That is an inherent risk, so a delicate balance. ‘

Comments are closed.