Dáil Éireann Debate, Thursday - 1 December 2016
150. Deputy Michael McGrath asked the Minister for Finance his views on whether the combination of the Government's help-to-buy scheme and the change in the Central Bank's macro prudential mortgage rules will have an inflationary effect on new house prices; and if he will make a statement on the matter. [38184/16]
Amharc ar fhreagraSince their introduction in February 2015, the Central Bank macro prudential rules have served an important function by enhancing the resilience of the banks and of households and preserving the stability of the financial system as a whole. As part of this core function, the Central Bank committed itself to keeping the measures under review and making the necessary adjustments to reflect the evolving financial and economic situation. Following the conclusion of the first macro prudential review, the Central Bank decided to refine the rules to ensure the sustainability and effectiveness of the current framework.
Whilst the Central Bank is independent in terms of macro prudential policy, the decision to adjust the regulations is welcome. In particular the change to the ceiling on the loan to value (LTV) ratio for all first time buyers (FTB), should better support first-time buyers in accessing the required mortgage to buy a home. Changes to the rules should also support increased construction and transaction activity and help to alleviate some of the pent-up demand in the rental market. Following the adjustments to the regulations, which come into effect from 1 January 2017, the Central Bank will continue to monitor the effectiveness of the regulations taking into account evolving financial and economic circumstances.
With regards to the Help to Buy initiative, the fiscal measures announced in Budget 2017 to support the housing market form an important element in the broader package of measures announced as part of Rebuilding Ireland, The Action Plan for Housing and Homelessness. Rebuilding Ireland has been designed to address the key structural constraints which continue to inhibit supply. It is within this context that the Help-to-Buy initiative has been designed to provide immediate and targeted support for first-time buyers before the structural measures contained in the Action Plan start to yield results. The targeted nature of the initiative should provide support to first-time buyer in meeting their deposit requirements whilst also encouraging the construction of new housing units.
In terms of inflation in the housing market, I wish to assure the Deputy that my Department continues to monitor developments in the property market including property price inflation on an ongoing basis. With regards to Help to Buy initiative in particular, my Department will commission an independent impact assessment of the initiative to determine its general impact. This report will be completed by September 2017, prior to Budget 2018.
