House buyers who fail to pay in full for their newly-built home by the end of the year face additional mortgage bills of more than €8,292. That effectively negates the benefit of the half percentage point cut in interest rates passed on by most of the banks and building societies last week.
However, solicitors are urging clients to look closely at the wording of the contracts before they top up their loans. Most standard contracts have clauses permitting builders to raise the price of the property to buyers in the event of rising costs of labour, raw materials or VAT.
These clauses, Clause 6a and 6b on the standard building contract are routinely struck out by solicitors acting for buyers. Developers often look to restore Clause 6b, the section governing the passing on of any rise in VAT, but given that there has not been any such increase since 1993, some have stopped doing so.
Any contract in which this clause is not present places the onus for the recent €1,800 rise in VAT on the average new home on the builder.
A spokesman for the Irish Home Builders Association said its view was that the liability for VAT in almost all cases would fall on the buyers, including first-time buyers already stretched by the removal of the €3,810 first-time buyers grant in the Estimates.
When both are added together, first-time buyers face additional bills of €5,610.
Should they include this in the sum borrowed, they would face additional monthly repayments of €34.55 on the average 20-year mortgage, according to figures from broker Simply Mortgages.
A spokesman for one of the leading lenders said: "At a time when people who already have their home are celebrating a half-point cut in rates, these charges are almost wiping out that gain for first-time buyers, the very people who can least afford it."
