The central bank will officially decide in November whether banks can participate in the government’s shared capital housing program.

In a letter to Sinn Féin housing spokesperson Eoin Ó Broin, the regulator confirmed that it was considering “the interaction” between its mortgage rules and the government’s proposed program.

The government has set aside 75 million euros in the 2021 budget for the initiative, which involves the state paying up to 30% of the cost of new housing in exchange for a stake in the property. Banks are also expected to subscribe to part of the program.

However, the regulator is examining whether that would let them break current mortgage rules, which limit bank lending above certain thresholds.

“The Central Bank has examined the interaction between the mortgage measures and the First Home equity sharing program, introduced as part of the Housing for All plan of the Ministry of Housing, and intends to communicate its findings as part of the program. the annual review of mortgage measures due. to be released in November 2021, ”he said.

“The focus and approach will be consistent with those outlined in the correspondence between the Central Bank and the Oireachtas Housing Committee in March 2021,” he said.

Mortgage rules prohibit buyers from borrowing more than 3.5 times their annual salary or, in the case of second home buyers, from borrowing more than 80 percent of the value of the property. However, a certain part of bank loans is exempt from the rules.

Inflationary

In a letter to the Oireachtas Housing Committee last year, the Central Bank expressed reservations about the program, noting that it could be inflationary and encourage participants to take on too much debt.

The minutes of an internal Central Bank meeting last year also noted that the program and other secondary housing support measures only focused on specific financial aspects of the housing problem “but basically, the supply deficit is what needs to be resolved “.

“The regime as defined could have an impact on prices, thus increasing personal debt levels. It is also not clear whether the program will promote any additional supply to any extent, ”the minutes said.

They also noted that a ‘tendency to use average statistics to support the introduction of a program masks the gaps in Ireland, particularly between Dublin and the rest of the country, as well as large variations in house prices within of a specific region ”.


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