Central Bank initiative on mortgages welcome but should not be rushed - Pearse Doherty TD
Sinn Féin Finance Spokesperson Pearse Doherty TD today submitted Sinn Féin’s proposals to the Central Bank’s consultation on the new rules on mortgages. While welcoming the Central Bank initiative the party’s proposal include a “breathing room” to allow for a full social and economic impact of the proposed rules and a change in the loan to value rule to 85%
“Sinn Féin believes that strong regulation is required on a macro-prudential level to prevent the possibility of another housing bubble developing . That is why we support this initiative from the Central Bank. However the rules should not be in place until there has been a social and economic impact assessment of the regulations looking at the impact of the rules given the ongoing issues with social housing, rent controls and tenants’ rights.
Another snappy public discussion should follow the government’s response to this assessment
Sinn Fein’s priority is that these rules do not impact immediately on the 1st January preventing young families who have been saving from suddenly facing a massive unaffordable increase in an upfront payment. The Central Bank needs to state categorically that its new rules will not come into force on the 1st January.
The whole consultation period has taken place in muddy waters due to the conflicting noises coming from government and Central Bank, The government’s mortgage guarantee scheme is impractical and has become a distraction and should be dropped.
The principle behind the Central Bank move is commendable and in the medium and long run will be of benefit to all. However the banking and housing system are both unfit for purpose at this time and pretending that they are will not help young families struggling to buy a home.
Our proposal would put the deposit required at 15% to be implemented when the government has looked at the impact assessment and said what it will do to protect young families in particular. We believe this approach strikes a balance between immediate concerns and a sustainable mortgage system for the years ahead.”
Summary of Sinn Féin’s proposals:
Sinn Féin believes that strong regulation is required on a macro-prudential level to prevent the possibility of another housing bubble developing. However there is no extremely urgent reason why this process should be rushed at this point.
The government’s “mortgage guarantee scheme” is a distraction at this point and has confused the debate. It should be dropped.
Sinn Féin believe that the combination of a Loan to Value (LTV) of 85% ,as opposed to 80%, and Loan to Income (LTI) rule do make sense at this point of the economic cycle.
There is need for an absolute ban on any mortgages over a LTV of 90% even within the range of deviation from the rules allowed.
We agree with the Central Bank’s proposals on Buy to Lets.
The above rules should not come into effect until there has been a social and economic impact assessment of the regulations looking at the impact of the rules given the ongoing issues with social housing, rent controls and tenants’ rights. The impact assessment should measure the likelihood of the regulations leading to a situation where many cannot save due to the cost of rented accommodation and new LTV requirement.
Following this impact assessment the government should make a policy statement as to how it will remedy the issues raised in the impact assessment. A short public consultation including Oireachtas scrutiny should follow. This process should be concluded by June 2015 at the latest.
These steps are necessary because of the confusion caused by the government and Central Bank’s conflicting policy positions on mortgage credit and the Central Bank’s apparent change of position during the consultation period. This issue is too critical to be decided in the murky confusion spread by government and the Central Bank over the last few months.
Once introduced the rules should be under regular review with a full, formal review within 12 months of its operation.