HOME LOAN SCHEME, WHICH LAUNCHES THIS FRIDAY Will banks follow suit with their own deals?
COLUM MURPHY, the managing director of Kehoe and Associates, says it will be intresting to see if the banks follow suit by offering their own low-interest, fixed-rate, fixed-term mortgages.
‘The new Rebuilding Ireland home loan is not a product that is available in the market and the banks may follow suit if they are missing a sector,’ said Mr Murphy.
Welcoming the new scheme, he said it will fill a gap in the market.
‘What I found interesting is that with a conventional loan from one of the pillar banks you will be stress tested, and the current interest rate might be fixed for five years. With the new scheme, there isn’t that need for stress testing because it’s set at two per cent for the life of the loan,’ said Mr Murphy.
He said that under the new scheme, someone earning €40,000 a year could borrow up to €200,000, with repayments of €850 a month, which is ‘a really positive step’.
Mr Murphy said the scheme ‘will be slightly inflationary’ for house prices.
‘But over the past 10 years, 95 per cent of the transactions in the residential sector have been for second-hand homes. There haven’t been any new homes,’ he said,
Mr Murphy said that currently if you wanted to buy a three-bed semi in Wexford, there was only one development available, but with a raft of planning applications for new developments with the county council, that situation will change considerably over the next year or two.
‘Now we have new homes coming on stream at the right time with the market providing a natural solution and responding to supply and demand.’
Many landlords are getting out of renting so the amount of rental stock is drying up and rents are increasing.
‘This new scheme will enable people to go out and buy their new house. Someone borrowing €150,000 at two per cent fixed for 20 years will be repaying €628 a month.. it’s 100 per cent aimed at new buyers and you can use a rebuilding Ireland loan for a new home, a second-hand home or you own self-build and it’s suitable for instance for a farmer’s son building on the land,’ said Mr Murphy. ‘It’s a very positive development.’