Zappone:”Young families are not in position to save 20% of their home mortgage in Ireland today”



Senator Zappone raised her concerns regarding the new Central Bank rules that propose that mortgage lenders need to be able to provide  20% deposit when buying their home.  Zappone argues that these rules may have undesirable consequences for the Irish economy as it will exclude many young working families from the property market and prevent them from investing in their financial futures.

Below the Senator’s comments on this issue: 

At the outset, I thank Senators Bacik, Moran and others for their comments on what happened over the weekend and for that support. Just as I was walking into the Chamber I met Deputy Twomey, who asked me whether it was as bad as it looked. I replied that it was.
  However, I wish to raise an issue today related to the Central Bank of Ireland's proposed mortgage rules, which I believe all Members are aware are scheduled to take effect from 1 January.

Members also are aware that these measures will require that most people put down a 20% deposit when buying their new home. There has been some discussion about this proposal subsequent to that statement but I welcome the Central Bank's efforts to prevent another overheating of the credit and property market.

I applaud its intent and acknowledge the need for regulation and prudence. However, I am concerned that the proposed changes could be devastating to an entire generation of young people seeking to buy their first homes.

As Members are aware and as many have raised in this House, rents are soaring and this issue also must be addressed urgently. However, most working couples are not in a position to save up to 20% of their home mortgage. They are struggling to pay mounting bills ranging from debilitating child care costs to ever-increasing everyday expenditures, as well as water charges when they ultimately come down the line.

Moreover, one particularly important point is the proposed rule changes could create a market for cash buyers that is inaccessible for normal working people and which may foster greater inequities in Irish society. As for the wider implications, Members regularly raise the issue of pensions here but how could young people invest sufficiently in their overall financial future, such as saving money for pensions or retirement, if they are struggling to meet hefty mortgage deposit requirements? Is that outcome desirable?

I acknowledge that the Minister for Finance, Deputy Noonan, has suggested the introduction of mortgage insurance in Ireland as a possible solution to the issue. Such insurance would protect banks against default of mortgages that go beyond 80% of the value and I welcome his innovation in this area as in many others.

Consequently, I suggest to the Leader that he might perhaps invite the Minister, Deputy Noonan, or even perhaps the Minister of State, Deputy Harris, to the House to update Members on the Minister's progress with regard to mortgage insurance, which I am aware will be considered by the finance committee.

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