Minister for Finance Michael Noonan wants the Central Bank to review mortgage caps for first-time homebuyers.

Citing anxiety about constraints in the Dublin market particularly, Mr Noonan said: “There is a shortage of starter homes in Dublin now.

“Builders would say that the application of the prudential regulations from the bank might be too restrictive,” he said.

“What I’m saying is that market conditions are changing rapidly and there are aspects of it now which, according to the construction industry, are inhibiting starter homes.

“All I’m saying is the bank should review. If the bank say we’re not changing anything then of course I’ll accept that.”

His intervention, in an interview with The Irish Times, comes eight months after the Central Bank introduced loan and income limits to damp down the property market.

In the same interview, he said the expanding economy could continue growing for a decade and said the Government parties, if re-elected, would use the proceeds of a flotation next year of shares in AIB to pay down some of the national debt.

Budgetary rules

Arguing there would be no deviation from strict budgetary rules, he engaged in a forceful attack on Sinn Féin and acknowledged the Government parties were likely to lose votes in the election as a result of the Irish Water debacle.

The Minister said the Government is proceeding with a public recruitment process for the appointment of a new bank governor in succession to Patrick Honohan, who plans to retire in November.

He said 30 applications were under review, adding that a shortlist of three candidates would be interviewed.

His remarks on the mortgage caps came amid pre-budget meetings yesterday with business and farming interests, among them construction industry representatives. He also met trade unionists and social campaigners.

Asked whether he had contacted the Central Bank on the matter, the Minister said he had not.

“I was making up my mind for the last couple of weeks,” he said.

“My conversation with the construction industry today would suggest to me that there’s a difficulty now in providing starter homes in Dublin.

“There are a lot of factors playing on that difficulty.”

Mortgage rules

New mortgage rules in place since late January, which were championed by Prof Honohan, included relief for first-time buyers.

However, Mr Noonan suggested further steps may now be required because the situation has since changed.

“I think the action of the bank was correct at the time and it was prudent at the time,” he said.

“We have a lot of extra people back to work now, growing housing lists and we have changed circumstances.

“I’m not being critical of the bank but I think anything like this should be subject to review and I would hope that there will one late this year or early next year.

“I think you should apply caps at different points of economic progress, and keep them under review from time to time.”

He added: “They need to match prudential regulation against things like rents. I mean, if you’re a couple and you’re paying €1,500 a month on rent and you’re on the maximum 3.5 multiple [of earnings] your potential mortgage would €1,000 or €1,100.

“It seems to me it makes sense to allow people like that to buy rather than to say to them keep paying your rent and accumulate a 20 per cent deposit.”