THE GOVERNMENT will not "artificially inflate" house prices, but will offer help to the lower-paid to get local authority loans, Taoiseach Brian Cowen said yesterday.
Under a plan to go to Cabinet tomorrow, the Housing Finance Agency is to get a line of credit from the National Treasury Management Agency.
The housing agency, which reports to the Department of the Environment, will then be able to use this to boost the sums it has available to fund the purchases of affordable homes. Minister for Finance Brian Lenihan made clear this will not cost the exchequer since the mortgages will have to be paid for at the full rate. The Government insists it is resisting calls by the Construction Industry Federation, banks and others for State action to boost construction.
Speaking to the Fianna Fáil parliamentary party in Galway, Mr Cowen said: "The role of the Government is not to artificially inflate house prices and we will not do so.
"The Government will help those eligible people who have negotiated a good price and wish to purchase a home but are being prevented from doing so due to unreasonable restriction of credit."
Questioned later, Mr Lenihan insisted that extra Housing Finance Agency mortgages would not halt "the necessary correction" taking place in property prices in Ireland.
"That is not an intervention in the mortgage market. It doesn't have any implications for public finances. It is off the balance sheet. We are not talking about interfering in the housing market," he said. Because of the current acute shortage of credit, however, he said: "Certainly, there is some scope at the margins for the Government to provide some element of finance to those who otherwise could not access it."
Making it clear that next month's budget will be painful, the Taoiseach said public spending will not rise "at a rate which the economy cannot afford". However, both he and Mr Lenihan indicated strongly that the budget will contain measures to help Irish industry export more, and do nothing to impede their competitiveness.
The current crisis, Mr Cowen told colleagues in his opening address, "should be seen as bringing about a necessary turning point in the life of the nation.
"This phase in the economic cycle is temporary and will pass. We must remain confident and optimistic about our future," he declared.
Tough decisions will have to be taken next month: "No politician likes doing so but we are not going to try to buy short-term popularity and put at risk all the gains of the past decade," he said.
