Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

We all agree that the need to accelerate the delivery of additional new houses remains acute. Section 6 of the Bill provides support to the new-build housing market by extending the help-to-buy scheme for a further year to the end of 2025. Section 6 also amends the help-to-buy scheme to enhance its interaction with the local authority affordable purchase scheme. This amendment will enable the use of the affordable dwelling contribution received by purchasers through the affordable purchase scheme for the purposes of calculating the 70% loan-to-value requirement, thereby facilitating access to a greater number of affordable purchase scheme purchasers to the help-to-buy scheme.

The Senator recommends that the definition of "loan" be amended to include a service charge as provided by the first-home scheme and that the definition of the loan-to-value ratio change to include qualifying funds received from the first-home scheme. I do not intend to accept those recommendations at this time for the following reasons. The Minister for Housing, Local Government and Heritage launched the first-home scheme in July 2022. The scheme, which is jointly supported by the State and participating mortgage lenders, has been established to make it easier for first-time buyers to afford a new home. The scheme aims to support first-time buyers to bridge an affordability gap by providing them a portion of the purchase price for their home in return for an equity stake in the purchased home. Under the first-home scheme, a special purpose vehicle, jointly funded by the State and participating mortgage lenders, offers equity finance to first-time purchasers of new builds. The maximum equity stake is 30% unless the purchaser is availing of the help-to-buy scheme, in which case under the terms of the first-home scheme, it is 20%.

The first-home scheme is administered by First Home Scheme Ireland Designated Activity Company, DAC, and the eligibility of persons to receive the equity support for home purchases is governed by the regulating documents of the joint venture. The Minister for Finance signed up to the joint venture agreement in July 2022, along with the other founding participants, in this case the three pillar banks and the chief executive of the already incorporated DAC. One term of the joint venture agreement was that the eligibility of customers be regulated by an agreed product rule book, developed out of negotiations among the founding participants.As such, there is no legislation underpinning the operational aspects of the first home scheme. The first home scheme already has a built-in mechanism that allows it to work in tandem with the help-to-buy scheme, by reducing the equity stake available to purchasers to 20% in cases where the help-to-buy scheme is claimed. This was put in place when the scheme was established to afford prospective homeowners the opportunity to avail of both the first home scheme up to a maximum of 20% of the value of the house and the help-to-buy scheme. Any potential changes to the first home scheme and how it interacts with the help-to-buy scheme would have to be agreed by all members of the joint-venture agreement.

I do not propose to accept the Senator's recommendation to lower the loan-to-value, LTV, ratio from its current rate of 70% to 60%. The help-to-buy scheme was originally intended to be limited to individuals who took out mortgages of at least 80% of the value of the property. However, a decision was taken to reduce the LTV ratio to a minimum of 70% to ensure that first-time buyers do not feel compelled to borrow larger amounts in order to qualify. The rationale for not reducing it further is that those who are in a position to avail of a mortgage at a lower LTV are considered to have sufficient resources to meet the deposit requirements of the macro-prudential rules and thus to be less in need of assistance from the Exchequer. Lowering the LTV ceiling would increase the dead weight in the scheme. The independent review of the scheme carried out in 2022 recommended that the LTV ratio be increased to 80% for purchasers who avail of the help-to-buy scheme. Housing is a top priority, and I confirm that the help-to-buy scheme will continue to be examined and, if required, additional changes will be considered next year.

I acknowledge Senator Casey's work on this issue. We are making a change in the interaction of the help-to-buy scheme with the local authority affordable purchase scheme, which has been welcomed by many, but a number of other stakeholders are directly involved in the process that relates to its interaction with the first home scheme. Neither my Department nor I are directly in control of it. However, I will continue to examine the issue the Senator raised. I accept the point he made that it makes a difference right now for some individuals between being able to buy a home using the help-to-buy and first home schemes in combination and not being in a position to buy. We had engagement with other stakeholders, but it was not possible on this occasion to make the amendment to the Finance Bill that is being sought.