Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

The Government recently launched "Construction 2020: A strategy for a renewed construction sector". The strategy includes the Government's desire for a return to sustainable levels of mortgage lending as part of a healthy housing market. This involves the consideration of measures to stimulate the development of housing. For developers to be supported, they need confidence that customers will be capable of accessing finance to purchase new builds. This means mortgage products being available to potential purchasers with an ability to support repayments. In Ireland's recent abnormal housing market, lending volumes have declined dramatically. The banks are highlighting the lack of supply of houses, in particular in urban areas, as a contributing factor for the lack of drawdown of approved mortgage facilities.  I look upon the development of this initiative as being an aid to encouraging and facilitating the supply of new homes, particularly for young families.

In other jurisdictions, such as the UK and Canada, mortgage insurance markets have been developed to support bank mortgage lending, particularly to first-time buyers. Mortgage insurance allows banks to share the risk of mortgage lending, either with the public sector or with private sector insurance companies, with the aim of increasing bank lending in general or to target groups.

I know that there has been criticism that such proposed schemes could cause house price inflation. In particular, I am aware of the criticisms that the UK scheme has received from some quarters.  As part of an economic impact assessment, my Department is undertaking research on initiatives operated not only in the UK but also in Canada, Australia and other jurisdictions, where mortgage insurance enables credit-worthy purchasers to access higher loan to value finance. My Department will consider how appropriate these schemes are in the Irish context. Any scheme introduced here will be contextualised for our current market conditions and designed to mitigate any threat of a housing bubble. As the Deputy is aware, the IMF has indicated that it would suggest significant caution in adopting a guarantee framework, especially one that would involve guarantees of a very large share of the mortgage principal. In the context of the deliberations under way in my Department, these and other views, positive and negative, will form part of the considerations.

Additional information not given on the floor of the House

As the economy recovers, any scheme I may introduce should ensure adequate availability of mortgage finance on affordable terms, particularly for first-time buyers or for people purchasing new houses. In setting up a scheme we would aim to provide the certainty needed to support greater levels of investment in new housing, with the associated benefits for the economy, for employment in the sector but also ultimately for the consumer in terms of choice and availability.

See this speech in context