Minister for Finance Michael Noonan has said assisting first-time buyers to secure mortgages will help stimulate the construction sector and has dismissed speculation it could fuel another bubble.
Reacting to reports that the Government would in effect be subsidising mortgages, Mr Noonan said the current system was preventing young couples from getting on the property ladder.
His comments came ahead of today’s launch of the Government’s strategy for a renewed construction sector, called Construction 2020.
Mr Noonan said the model being ironed out ahead of the Finance Bill, which would guarantee a portion of mortgages for first time buyers in order to incentivise banks to lend, would be temporary in nature.
“There is a supply-side problem in Dublin and there aren’t enough family homes.
“Now part of it is because they are not being built and another part of it is if they were being built people don’t have the money to buy them,” he said.
“It is very difficult to envisage a young couple having more than 10 per cent of the price of a house as a deposit and at present they are being required to come up with something like 20 per cent.
“So we are examining it. It would be only for new houses, not for the second hand market.”
Responding to the concerns that, as in the UK, such a policy may lead to a surge in market activity, he said that Ireland was now “a long way from a housing bubble”.
He said that cities, and in particular the greater Dublin area, needed new housing stock and that the provision of social housing alone was not what the market required.
This Government mortgage insurance scheme would share the risk of lending and allow first-time buyers to purchase homes with smaller deposits while securing mortgages of up to 95 per cent of the value of the property.
This morning Reform Alliance TD Lucinda Creighton also warned the proposals would cause a property bubble, saying the plan would create more demand and pitch first time buyers against one another.
She said she would prefer to see a system whereby house prices were linked to average income.
She also told RTÉ’s Morning Ireland that she would be contesting the next general election as part of the Reform Alliance and not Fine Gael.