Catherine Connolly (Galway West, Independent)
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110. To ask the Minister for Finance further to Parliamentary Question No. 82 of 23 November 2023, his plans for the phasing out of the help-to-buy scheme; his plans in the interim to increase the minimum mortgage LTV to 80%, as recommended in a report (details supplied), and the timeline for same; and if he will make a statement on the matter. [4282/24]

Michael McGrath (Cork South Central, Fianna Fail)
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The Help to Buy Scheme was introduced in 2017 with the purpose of assisting first-time buyers with the deposit required to purchase or self-build a new house or apartment to live in as their home. The relief is only available in respect of new builds, with a view to increasing the supply of new housing and stimulating demand.

To date, the Help to Buy scheme has been a significant support for first time buyers of new homes. To 30 November 2023, some 43,622 first-time buyers, either singly or as part of a couple, have benefited from the scheme.

As the Deputy is aware, Finance Act 2023 extended the Help to Buy scheme for a further year to the end of 2025. The scheme was also amended to enhance its interaction with the local authority affordable purchase scheme. This amendment will enable the use of the affordable dwelling contribution received through the affordable purchase scheme for the purposes of calculating the 70% loan to value requirement, thereby facilitating access for a greater number of affordable purchase scheme purchasers to the Help to Buy scheme.

The Deputy has previously raised concerns regarding the potential that the scheme may exacerbate housing prices, and as has previously been stated, policy makers were aware at the time that the scheme was being developed that it was not without risk. Likewise, they were aware that there was a danger that, against a background of constrained supply, the initiative could serve to increase prices for new homes, thus potentially undermining to some extent the affordability aspiration of the scheme. However, on all occasions when the matter was formally examined to date, concerns in this regard were not borne out by the review data.

Studies carried out by Indecon Economic consultants found that the main driver of house prices was the mismatch between supply and demand rather than the existence of the scheme. Similarly, the review by Mazars in 2022, referenced by the Deputy, found that there is no definitive evidence that Help-to-Buy pushed up the price of new houses. In fact, Mazars found that the prices paid for new homes by people who received the Help to Buy relief were slightly lower than new house prices in the economy in general, likely because of the €500,000 price eligibility cap.

There have been some significant changes in the market even since the Mazars report on the scheme was published. The increase in interest rates in the intervening period means that further stability and certainty is needed for first time buyers who may now face higher mortgage interest rates. I decided that now is not the time for the withdrawal of supports for those purchasers. The extension of the Help-to-Buy for a further year to 31 December 2025 takes account of the need for certainty in the market pending the increase in new housing supply envisaged by the Government’s Housing for All strategy.

The HTB scheme, 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 subsequent 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 Revenue statistics, from the inception of the scheme to End-November 2023 self-builds have represented 25.28% of approved 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. To increase the LTV to 80% could have the effect of excluding more self-builds from availing of the relief.

As I indicated on Budget Day, I confirm that the Help to Buy scheme will continue to be examined to see if any additional changes are necessary.

I will continue to work with my Cabinet colleagues to ensure that any further interventions in the housing market are appropriately calibrated, represent the best use of scarce public resources and boost the supply of housing in both the public and private sectors.