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Direct bank Involvement in Shared Equity Loan Scheme breaches Central Bank lending rules and puts borrowers at greater risk - Eoin Ó Broin TD

18 January, 2021 - by Eoin Ó Broin TD

Sinn Féin spokesperson on Housing Eoin Ó Broin has said that direct bank involvement in the Shared Equity Loan Scheme breaches Central Bank lending rules and puts workers and families at greater risk.

The comments come as the Dublin Mid-West TD reveals ongoing negotiations between the Department of Finance and the Banking and Payments Federation over the banks role in the controversial Shared Equity Loan Scheme.

Teachta Ó Broin said:

"The Department of Finance’s banking section is in negotiations with the Banking and Payments Federation over the banks direct involvement in the government's forthcoming shared equity scheme.

"The proposal being discussed is that a special purpose vehicle will be established, with both the State and the banks holding an equal share. The banks will provide €75 million to match the €75 million allocated to the scheme by government in Budget 2020.

"The talks have stalled due to a disagreement on how much interest should be charged on the shared equity loan. Initially the banks had indicated a willingness to agree to a fixed interest rate of 1.5% with repayments starting after five years. 

"However, the banks are now demanding a higher entry level interest rate of up to 3% with periodic increases leading to a final interest rate of up to 6% in year 25.

"The direct involvement of the banks in the shared equity loan scheme is a clear breach of the Central Bank's macro prudential lending rules - that bank finance and staff would be involved in providing secondary loans on top of a mortgage 3.5 times the borrowers gross income is a breach of those rules.

"Worse still, the banks demand for a rising interest rate would mean borrowers mortgage payments would increase significantly over time. A similar interest change was in place with the last shared ownership scheme operated under Fianna Fáil from 2003 to 2010.

"An independent review conducted by Minister of State for Housing Jan O’Sullivan in 2013 was highly critical of this increasing charge. It was one of a number of factors that led to mortgage distress rates among those in the shared ownership scheme being four times higher than those with standard mortgages.

"Saddling working people with every greater levels of debt and rising monthly mortgage payments to buy overpriced homes in not an affordable housing scheme.

"The latest revelation about direct bank involvement in the shared equity loan is further proof that Fianna Fáil have learnt nothing from the Celtic Tiger property crash.

"They are once again trying to implement policies that meet the needs of big developers and the banks while exposing workers and families, and the taxpayer, to significant risks.

"This shared equity scheme should be scraped and government should focus on the direct delivery of affordable homes to rent and buy at prices that working people can actually afford."

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