Kieran O'Donnell (Limerick City, Fine Gael) | Oireachtas source

I missed some of the debate but I want to touch on a few issues. The witnesses were looking back over the period in terms of house prices going out of control and so forth. The 20% deposit is a very crude instrument in terms of the price of houses. In the Irish psyche there is an aspiration to own a home. We are different from other countries like Germany, in which there is a huge rental market. Property should not become the preserve of the rich, and I am nervous that will happen with this 20% deposit requirement. It means that is someone is buying a €200,000 home, they must come up with a €40,000 deposit. That is clearly excessive. At the same time there is negative equity at the moment. This has put young couples in particular in a terrible situation, because in many cases they ended up buying apartments and much smaller homes. They were told that property would appreciate in value and now they are stuck in many cases.

What is the sustainable model? This seems to be a very crude instrument. The proposed mortgage interest premium model, under which it will be covered by an insurance premium, means they will probably end up paying the same amount. That is certain. It is as though, if one is being covered by 10%, one is paying the full amount of the mortgage. How do we deal with supply issues? Dr. Lyons said it was about loan to value rather than income. I am not certain I agree with him on that, because a couple could, through no fault of their own, have had a peak in income. During the Celtic tiger they might have qualified for mortgages they should not have received - six or seven times earnings and the application done on the back of a shoebox. They might have bought a house. They might have had savings and been able to get a mortgage with a a loan to value ratio of 80% or 90%. Then suddenly their income drops and they cannot meet their mortgage. It is a crude instrument. It means the lender can move on them and sell the house, but it is a very financial instrument that works for the lender, but not the borrower.

I am asking the witnesses what instruments they would put in place to take account of supply. Mr. Deeter referred to this as well. How could we ensure people do not get into negative equity and can afford mortgage repayments on a sustainable basis? What we put in place now will probably only manifest itself in ten years time. What was put in place during the Celtic tiger and many places where people bought in 2002, 2003 and 2004 only manifested itself five or six years later when it crashed, or, at this stage, ten years later.