Written answers

Thursday, 14 July 2022

Photo of Éamon Ó CuívÉamon Ó Cuív (Galway West, Fianna Fail)
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283. To ask the Minister for Finance if he will change the 70% borrowing rule in relation to the minimum eligible amount of borrowing for the help-to-buy scheme to exclude the value of the site in assessing the gross value of the house for the purpose of the scheme and instead base it on a minimum of 70% of the actual construction cost of the house being borrowed in the case of single houses built on land gifted by a parent or close relative; and if he will make a statement on the matter. [39044/22]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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The Help to Buy (HTB) incentive is a scheme to assist first-time purchasers with the deposit they need to buy or build a new house or apartment. The incentive gives a refund on Income Tax and Deposit Interest Retention Tax paid in the State over the previous four years, subject to limits outlined in the legislation. Section 477C Taxes Consolidation Act 1997 outlines the definitions and conditions that apply to the scheme.

As the Deputy has referenced, in order to avail of the HTB incentive, the loan-to-value ratio (LTV) for a property must be 70% or more. In the case of a self build residence, the lender will apply a valuation using the Central Bank of Ireland's macro prudential mortgage rules, which consists of the aggregate of the market value of the land and the estimated costs of construction. It should be noted that the Central Bank is independent in the decision of its macro prudential rules.

The HTB scheme, as announced in Budget 2017, was initially intended to be limited to persons who had mortgages with a minimum LTV of 80%. However, Central Bank data indicated that a sizeable number of first-time buyers take out a mortgage with a LTV of less than 80%. As such, It was decided to amend the scheme in the Finance Bill to set the minimum LTV at 70% so as to ensure that first-time buyers did not feel compelled to borrow larger amounts than they would have otherwise in order to qualify for the scheme.

According to published Revenue statistics, from the inception of the scheme to 30 June 2022, self-builds have represented 25.48% of approved claims. However, to end 2021, the proportion of claims in the 70% to 85% LTV bands are much higher for self-builds, accounting for more than 40% of all claims. The nature of self-builds is such that an applicant may already own the land on which the house is built which means that they are likely to need to borrow only in relation to construction costs.

Individuals who are in the fortunate position of being able to avail of a mortgage at a lower loan-to-value ratio than 70% are considered to have sufficient resources to more than meet the deposit requirements of the macro-prudential rules and thus less in need of assistance from the Exchequer. The objective of the scheme is to stimulate the housing market at the entry level and not to provide supports to individuals who are seeking houses at the upper ends of the market.

It is not at all clear that it would be fair or equitable to allow for different eligibility criteria with regard to LTV ratios in respect of self-build properties vis-á-vis that which applies to all other new build homes. As such, I do not currently plan to amend the scheme in the manner that has been suggested by the Deputy.

Finally, the Deputy may wish to note that work by external consultants, Mazars, on the review of HTB is nearing completion. The outcome of this comprehensive review will help to inform decisions on the future of the scheme beyond its current sunset date of 31 December 2022. However, this is a matter that will fall to be considered by Government in the context of the Budget 2023 process and it would not be appropriate for me to offer further comment at this time.


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