Opposition parties claim mortgage rule changes may push up house prices

The changes in Central Bank mortgage lending rules could lead to higher house prices and increase indebtedness in Irish society, Sinn Féin has warned.

Reaction to the rule changes – which will allow prospective homeowners borrow four times their income rather than 3.5 times – was almost uniformly negative among Opposition parties, with spokespeople questioning if it would make houses any more affordable to families.

Sinn Féin finance spokesman Pearse Doherty demanded to know what caused the Central Bank to change a macro -prudential policy it had strongly stood over for most of the past decade. “How come its position has changed? How come it can now convince us it is not going to lead to higher indebtedness and lead to higher house prices? The Central Bank has said recently increasing the limits will just be more money chasing the same number of homes leading to higher house prices. There is a real concern.”

Among those who criticised the change was the Dublin South Central TD Patrick Costello, who is a member of the Green Party. He said that he failed to see how the measure would help those seeking to buy their own homes.

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“These rules were introduced post-IMF bailout as an effort to restrain the market and property prices more generally. Whilst they can be difficult they do help slow price increases.

“The proposal to extend the borrowing rules from 3.5 times your income to four times will not help anyone buy a home. In the absence of supply, being able to borrow more will just drive up prices. I fail to see how this is helping buyers. This will just further enrich developers and banks.”

Mr Costello called on Minister for Housing Darragh O’Brien and Minister for Finance Paschal Donohue to “push back against these changes”.

Mr Costello and his Green colleague Neasa Hourigan both lost the parliamentary party whip for six months last May when they voted against the Government on a private member’s motion on the National Maternity Hospital.

Richard Boyd-Barrett of People Before Profit said the changes meant that the mistakes of the Celtic Tiger were being repeated and were “gripping another generation of people with crippling debts as interest rates continue to rise”.

He added that people were now caught in the “vice grips” of extortionate rent, unaffordable house prices and a chronic lack of affordable and social housing.

Speaking on RTÉ on Wednesday, Mr Doherty said he was surprised by the change. “The Central Bank has been adamant that despite pressures not to change the income limits and not to change the loan-to-value limits because they have made the point that it risks fuelling house price increases. In fact, they show that rules introduced in 2015 to 2109 actually reduced house prices by 25 per cent. (Despite the rules) we still have runaway house prices. Prices have increased by 12 per cent in the last year.”

He said the Central Bank would argue that the difference is that interest rates are increasing and that would have a dampening effect on demand. Mr Doherty argued that though people would be able to borrow more, they would have to pay back more.

“This change needs to be monitored very carefully,” he said, saying that the bank should review the changes every month.