First-time house buyers clearly represent a safer prospect for lenders, according to Patrick Honohan, the governor of the Central Bank, at one of his first public engagements after the introduction of controversial new rules restricting mortgage lending.The rules allow higher loan-to-value ratios for first-time buyers, particularly those buying less expensive homes.
“The first-time buyer effect is a significant one,” Mr Honohan told the Trinity Economic Forum on Friday evening. Central Bank research has shown that an average of 15 per cent of non-first time buyers were in default, compared to just over 10 per cent for first-time buyers.
Mr Honohan said that the gap in default rates between the two groups rose as loan-to-value ratios increased, so that that gap was greater at loans representing 80 to 85 per cent of the value of the property. This was not the only driver of the decision to have somewhat easier lending rules to first-time buyers, but it did feed in to the Central Bank’s decision.
Also at the Trinity College forum, Minister for Jobs, Enterprise and Innovation Richard Bruton clearly indicated concerns that any new negotiation with the social partners did not take the form of the old social partnership model.
The Government has indicated that it will reopen some form of talks on pay this year, but concerns have emerged in Fine Gael about the form these will take, while business leaders have been strongly critical of union demands for significant pay rises. Mr Bruton told the students that part of Ireland’s economic problems were caused by a “phoney consensus under the guide of social partnership, which stalled reform” and closed down questioning of policies in some areas.
He later referred to a new political approach which the new government was promoting where there “isn’t a special group of people who have a charmed access”. Mr Bruton has reportedly expressed concern in Government about the prospect of a return to “social dialogue”, along the style of the former partnership process, which has also raised the hackles of some Fine Gael backbenchers.
