Housing loan scheme under fire

ROI Minister for Housing’s plan to boost the mortgage market sparks fears of price inflation and low supply.

Housing Minister Darragh O’Brien’s shared equity scheme, part of the Affordable Housing Bill, offers equity loans of up to 30 per cent on new build homes under €400,000. O’Brien wants to introduce the scheme for a year, when it would be up for review.

The Central Bank and the Economic and Social Research Institute have warned of unintended consequences, the former warning that the move, in isolation, “is likely to have a limited impact on the ultimate supply-side problem in the Irish housing market”.

A similar initiative in the UK has shown that the net effect was to drive up prices, particularly in urban centres, without increasing housing supply, according to a study by the London School of Economics.

Largest ever increase in savings

Meanwhile, household savings increased by the largest amount ever during the pandemic, but the increase in savings is not evenly distributed.

According to the ROI Central Bank “pandemic savings” are more likely to be deferred spending (spent when the economy opens back up again) than precautionary (held in savings).