Banks should be allowed to offer 50-year mortgages to give people on lower incomes a chance to own their own home.
That’s according to the Institute of Professional Auctioneers & Valuers (IPAV), which is also calling for the general limit of 3.5 times gross salary to be increased to 4.5.
In its pre-budget submission, the institute also called for people using the Help-to-Buy Scheme to be offered a €20,000 grant to help them with their deposit.
On Newstalk Breakfast this morning, IPAV Chief Pat Davitt said low and middle-income earners will never be able to buy a home unless something changes.
He noted that people earning up to €60,000 per year are currently able to borrow a maximum of €210,000 – when the average price of a three-bed semi is between €300,000 and €350,000.
“Obviously, if you need to extend the amount of money these people can borrow, extending the term they can borrow it for, makes it much easier,” he said.
“If you borrow a mortgage from 40 years to 50 years, the chances are you’ll able to borrow it for maybe a third of the rent you’re paying at the moment.
“You will still be able to live your life. You’ll have a much longer term on your mortgage and, depending on how you get on with your mortgage over ten or 20 years, you can then, when you can afford it, start paying more back and possibly pay it back earlier.”
Property prices
He said Irish property is not likely to get cheaper any time soon because the building costs are continuing to rise.
“Mortgage lending rules came out in 2015 when properties were about half the price they are at the moment,” he said.
“Now they’ve doubled in price and the mortgage lending rules are the same.
“Whether the Central Banks likes it or not, they are going to have to be changed sooner or later. This is an opportunity to change it and also give the same people that are borrowing more money a longer term on their mortgage.
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“If we’re ever going to be build new houses in rural Ireland of any description, now is the time to build them.
“We’re not building new houses in many small rural towns and builders can’t afford to build them because if they build them, people can’t afford to buy them. We need to give those people an opportunity to buy them.”
Pensions
He pointed to a recent ESRI report which found that home ownership among people aged between 25 and 34-years-old fell to 60% to 27% between 2004 and 2019.
The report said that by the time they retire about half will own their own home – down from the current figure of 90%.
“Something has to be done if we are going to encourage younger people to buy properties,” said Mr Davitt.
“If you are 25, it is not a bit inconceivable that you could get a mortgage up to 75 because the expectancy age now is 80 or 85 or something to that effect.
“Under the consumer credit act, anybody who takes out a mortgage has to take out life insurance to go with it. So should you die before the mortgage is paid off, the insurance will pay it off anyway.
“What we’re trying to do is get more people into the property market, more people, younger people into it, that will have ownership of their property by the time they get to pension age, so they don’t still have to pay rent when they get there.”
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