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Irish government undercuts market with affordable 30-year fixed-rate mortgage loans

  • 22/01/2018
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The Irish government is to begin mortgage lending to first-time buyers next month at rates lower than most lenders are offering.

A statement from housing minister Eoghan Murphy outlined the plans which form part of an overall Rebuilding Ireland strategy.

The Rebuilding Ireland Home Loan will be available to first-time buyers as individuals or couples, for up to 90% loan to value on new or second-hand homes at fixed rates of interest between 2% and 2.25% for 25 to 30 years.

At present the Eurozone interest rate is 0.25%, and in Ireland five-year fixed loans at 90% LTV start at 3%.

The loan will be available nationwide from local authorities from 1 February and there are caps on maximum income and maximum house prices in certain areas.

Gross income cannot exceed €50,000 (£44,088) as a single applicant, or €75,000 (£66,132) for joint applicants.

A maximum value of €320,000 (£282,167) applies in the Greater Dublin Area, Cork and Galway, while in the rest of the country it is €250,000 (£220,443).


Equity share

Murphy also announced affordable purchase and rental schemes as part of the government’s plan to increase the stock of social housing by 50,000 homes by 2021.

The new Affordable Purchase Scheme is a national scheme that will see affordable homes built initially on state land, in co-operation with local authorities.

With local authorities providing the land at reduced or no cost to facilitate affordable homes, the price of the affordable house will be discounted and the state will retain an equity share in the house, relative to the discount from the full price.

The equity share can be paid off, interest free, by the purchaser at a later date. Or if the owner wants to sell early, the state can take that portion back at the time of sale.

Funds built up from the equity retained in the affordable homes will be used to invest in building more affordable homes.


Cost rental model

The Affordable Rental Scheme will be done using a cost rental model where the rent paid covers the cost of building the property, together with ongoing management and maintenance charges, but with a minimal profit margin included.

A pilot project is already in the process of being completed and is expected to go to market later this year.

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