Billy Kelleher (Cork North Central, Fianna Fail) | Oireachtas source

The Fianna Fáil Party welcomes the proposed measure as an acknowledgement of the pressures first-time buyers will experience in the foreseeable future. Last week, I raised the publication of guidelines by the Central Bank, on which discussion and consultation are taking place. A broader debate is required on housing policy, housing strategy, the shortage of housing, ways to increase supply and action to make the purchase of a home affordable for ordinary people. Home ownership is a principle that is held dear by most people.

Many people were critical of escalating house prices in the past and argue that they brought about the economic crash. That it is necessary, only a short few years after the crash, to introduce policies to try to assist first-time purchasers of homes, indicates that the inflationary pressure on house prices in the capital may spread to the regions.

We all want a functioning and stable housing market. When one peels back the various layers, however, one finds that we still have a dysfunctional banking system. It is worth repeating that despite our membership of the Single Market and the euro, Irish banks are penalising their customers to the tune of about 2% in terms of excessive interest rates. The penal interest rates being charged by Irish banks have made the purchase of a home unaffordable for many. Having bailed out the banks and supported them through recent turmoil, the State has received little thanks. Banks are repairing their balance sheets by charging customers through the nose in terms of interest rates and reaping the benefits of increasing property prices.

The Government gives itself a pat on the back because the banks are returning to profitability but they are achieving this by nailing customers to the wall through criminal rates of interest, which currently stand at between 4.5% and 5%. Every time the European Central Bank cuts the interest rate Irish banks quietly issue polite press statements in which they decline to pass on the ECB reduction in their variable rates. The policies they are pursuing make it virtually impossible for first-time buyers to purchase a home. In the meantime, the Department of Finance sits on its hands and the Government allows itself to be slapped around by the very banks the State rescued. It is time something was done on this issue because we are on the same slippery slope again.

The Minister for Finance spoke earlier about meeting the fork in the road where paths diverge in the yellow woods. Many people have reached a crossroads. This welcome measure, which will cost the Exchequer approximately €2.4 million, will provide a small amount of assistance to first-time buyers. If the current inflation in house prices in Dublin persists, much more than this measure will be needed to help first-time buyers save a deposit of 20%. First-time buyers are at a serious disadvantage because they must compete with investors with access to cash who can get on the property ladder faster. We are asking the banks to support first-time buyers by passing on interest rate reductions as opposed to issuing fancy press statements applauding themselves for returning to profitability.

They are doing it by extortion. We have an ECB rate of 0.15% but we are asking first-time buyers to march into a bank with a small bit of assistance from the State on DIRT interest retention return. The banks will say that it is a 4.5% variable rate regardless of what the European Cental Bank charges. There is almost a 0% interest rate in Europe, yet we are charging 4.5%. Interest rates are going to increase over the coming years and the variable rate will also increase quite dramatically.

We should be strong on the housing supply issue so that we can get a functioning market. We should also have a discussion very quickly on the Government's view of the loan-to-value ratio guidelines that have been announced by the Central Bank. There is a consultation process and the Central Bank is independent. However, that does not mean that the Government should not have a view on the guidelines. This view should be expressed in here at some stage because it is fundamental and critical to giving people a sense of ownership and a stake in society. We have always encouraged home ownership, which is the one thing people yearn for. It is not just about getting on the housing ladder, but a value system giving people a stake in society. The Government is turning a blind eye to the banks' extortionary tactics while trying to help first-time buyers. We welcome this provision but it is insignificant given the inflationary pressures creeping into the Dublin housing market, which are beginning to spread throughout the country.

We welcome this measure and support it but there must be a well thought out response from the Government, the Oireachtas and the people concerning the Central Bank's loan-to-value ratios. If we continue as we are with inflationary pressure in rents as well, investors will be back in the market getting good returns while outpricing first-time buyers. We will, therefore, be back to square one. The State is trying to support first-time buyers in a good, well-intentioned and meaningful way but it will have no significant impact on their ability to get on the ladder at the start. Therefore, this measure needs to be broadened out to a certain extent.

The measure will operate for 2015 and 2016, with savings accruing for the previous four years. If we keep going as we are, however, people will not have any savings. Their savings will be eaten into by the cost of rents in this city. The Department of Social Protection is trying to play catch up with rent allowance for people who are dependent on assistance for private rental accommodation in the capital city. That is because of the crisis in social housing. We are in this continual catch-22 situation, so have we learned anything?

For the past three or four years, it was considered almost evil to mention building houses again. Ballaghaderreen and some other parts of the country may not require houses but we do need houses quickly elsewhere. There should be a proper policy response to this matter, but it has not happened. In fairness, there was an acknowledgement in terms of the 80% windfall tax. I hold no truck with developers or builders who make loads of money, but the problem is that without them we cannot build houses. The State certainly cannot build them because, to date, it has failed miserably to do so. There is a need for proper policy responses. In his Budget Statement, the Minister for Finance said the windfall tax might encourage people to bring land to the market for development stage. Such measures are welcome and will be discussed but they are quite a way down the road, so we should be conscious of what we are doing.

First-time buyers are having difficulty buying houses and paying for them, even though the interest rate - which is high compared to the ECB's lending rate - is at a historically low level. Over the term of a loan, it is always hardest to meet one's repayments for the first seven to nine years. No doubt, we will have interest rate rises in the coming years. The German economy will not be stagnant forever and there will surely be some growth in the European economy over that time. The very minute there is some inflationary pressure in the German economy, I can guarantee the Tánaiste - she is an accountant who has studied economics - that there will be interest rate increases immediately to respond to such inflationary pressure. People here will then be out of kilter with the broader European economy due to huge borrowings and rising interest rates. We should act quickly and with steely determination to ensure an adequate housing supply, thus reducing the pressure on first-time buyers.

We welcome the measure. I would like to go on longer but I know this is an important issue to which many Deputies want to contribute. The Minister can divide the sum of €2.4 million any way she likes but it is a finger-in-the-dyke move. An awful lot more is needed to ensure that our first-time buyers have a start. They must have an opportunity to play a meaningful role in society.

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