20% Deposit For A Mortgage?

Once again those of us who aren’t filthy rich are left screwed by the government. But hey, what’s new? What follows is a rant of sorts; feel free to chip in.

In an attempt to prevent another property crash, the Central Bank have issued a new mortgage loan rule that will take effect from January 1st in which prospective buyers will require an enormous 20% of their house value to pay as their deposit. That’s double what’s been required heretofore. This new rule, as the Irish Times explain, is also said to ‘dampen the rate of price rise currently being experienced in the market.’

?We believe that measures such as these are a standard part of a well regulated financial system and introducing these precautionary measures should contribute to a stable and well-functioning mortgage lending market” says Stefan Gerlach, Deputy Governor of the Central Bank

In theory, we see what they’re doing. We cannot afford to drive ourselves towards another property crash such that our economic recovery would be set back to zero, but what does this mean for those of us with plans to buy in the coming years?

Currently, if you’re looking to buy in Dublin, you’re looking at well over €300k for something fairly basic (no seriously, just have a goo around daft.ie; the standard of dwellings as compared with their current pricing is WAY off). Data reports tell us that house prices have risen over 25% year on year from September 2013 to September 2014. In fact we believe the average house price for a standard 3 bed in South Dublin is now upwards of €400,000 which means you’d need an €80 or €90 grand deposit if you had high hopes of living south of the river. €90 GRAND. And that’s before the bidding wars begin. It’s much the same story in North Dublin.

Needless to say, Irish folk on low to mid level incomes find themselves once again at the mercy of the government’s drastic measures. Sure, those with plenty of cash to splash will sail through, but how do a young family with children stand a chance at amassing such a large chunk of money when one of them is forced to stay at home due to massive child minding costs?

What’s more, if people are unable to reach these targets, then they’re forced to stick with renting which, as we all know, is getting more and more expensive. If our dependency on renting continues to rise, then we’re not only at the mercy of the mortgage lenders, but also the renting landlords, who could raise the rent to whatever they fancy, given the enormous demand.

In short, are we screwed? Are we about to see another mass exodus out of the country? Is there any way, with enough uproar, that the Central Bank would meet the people of Ireland in the middle with something a little less extreme?

None of us want another property crash, and none of us want the prices to skyrocket to what they were during the boom times, but alongside that, we’d like to think that if we’re holding down secure jobs and paying our dues, that we’d be able, in our own country, to get a step on this precarious property ladder.

What’s your take? How will this effect you? Share your story below.

@CarolineForan