Michael Finneran (Roscommon-South Leitrim, Fianna Fail)

I propose to take Questions Nos. 6, 13 and 50 together.

As indicated during the debate on budget 2009, it is important that the ongoing process of correction in the housing market is not artificially interfered with. Given that sentiment in the housing market is heavily dependent on wider sentiment in the economy, the Government's approach is focused on the broader economic fundamentals and on ensuring, ultimately, that the housing market is underpinned by these.

Any housing specific interventions must be targeted in nature and designed to achieve specific outcomes. The announcement in the Budget of the introduction, for a limited period, of the new home choice loan product for certain first-time buyers is fully in line with this policy. It is designed to respond, in a targeted way, to a very specific set of circumstances in the housing market whereby prospective first-time buyers, who would previously have been in a position to access mortgage finance from one of the financial institutions are not currently in a position to do so due to the impacts of the credit crunch. The initiative provides no incentive to enter the housing market; it will merely facilitate certain first-time buyers who have decided to purchase a home at this time.

Home choice will be available to first-time buyers of new houses, subject to a maximum loan of €285,000, depending on income, and a maximum loan to value ratio of 92%. The loan term will be up to 30 years. A minimum income of €40,000 will be required and a detailed credit policy is now being finalised. A single standard variable interest rate product, related to the prevailing rates available from commercial institutions, will apply. All applications will be rigorously assessed having regard to an applicant's ability to pay, credit history and all other aspects of the formal lending policy. An applicant's ability to pay will be also stress-tested to assess ability to repay at current rates and in the event of significant interest rate rises.

The scheme applies to new houses because a significant majority of first-time buyers purchase new houses. The average cost of a new house is almost 14% lower than that of second-hand houses and, as such, it was considered appropriate to target the scheme towards properties which are more affordable for first-time buyers. I do not anticipate this will have an appreciable impact on house prices nor do I think it will do anything to distort the market correction.

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