Peter Fitzpatrick (Louth, Fine Gael) | Oireachtas source

I broadly welcome the Central Bank's common sense and fair approach to the issue of mortgage deposits, particularly those required by first-time buyers, as part of a responsible approach to mortgage lending now and in the future. I have often been asked why the Central Bank was introducing these measures. The result of the new regulations will not only be to increase the resilience of the banking and household sectors to the property market, but also to reduce the risk of bank credit and house price spirals from developing in future.

It should be noted that the Central Bank is independent of the Government and the Oireachtas. In recent months, I have had a great deal of contact with my constituents in Dundalk and its surrounding areas, including Ardee, Dunleer and Cooley, regarding the issue of mortgage deposits. First-time buyers were concerned that they might be prevented from getting on the property ladder. They had read reports that, among other stipulations, they would be required to have deposits of 20%. This caused them great stress.

The Central Bank's announcement that a 10% deposit would apply to first-time buyers was welcome, especially given the fact that most such buyers in County Louth, Dundalk and Ardee in particular, would fall under the proposed €220,000 limit for 10% deposits. I have examined how these proposals would impact first-time buyers purchasing a property valued at €220,000. The new regulations will allow a maximum loan-to-value figure of 90%. In practical terms, this means that a first-time buyer purchasing a property valued at €165,000 would require a deposit of €16,500, with a maximum mortgage of €148,500. For properties valued at more than €220,000, the maximum loan-to-value mortgage will be 90% of the first €220,000 and 80% of the balance. For example, the maximum loan granted to a first-time buyer purchasing a property valued at €250,000 would be €222,000 and the deposit required would be €38,000. These new regulations are equitable and fair and will protect all first-time buyers.

Like the rest of the country, we in Dundalk, Ardee and Dunleer were badly affected by the property crash, with house values on average falling by more than 60%. Sadly, some families that purchased at the height of the property bubble, many with 100% mortgages, will be in negative equity for the foreseeable future. We all agree that this situation must never recur. The measures being taken by the Central Bank will go a long way towards ensuring this and will prevent us from returning to the unsustainable lending practices of the Celtic tiger era, when 100% mortgages were regularly given to first-time buyers. In many cases, mortgages of more than 100% were given. Despite the low interest rates of the time, this was never going to be sustainable. Unfortunately, many of our citizens are now paying a heavy price.

The new measures will bring stability to house prices and prevent a rapid increase. At the height of the bubble, Dundalk saw prices increase unsustainably quickly. For example, a standard three-bedroom semi-detached house would have cost more than €200,000 in 2007 compared with approximately €45,000 in 1997. Had the new controls and regulations been in place ten years ago, Ireland would not have endured the worst economic crash in our history.

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