Letters

Central Bank and mortgage lending rules

What could possibly go wrong?

Sat Oct 22 2022 - 00:03

Sir, –It seems surprising that the mortgage lending rules are being relaxed now that housing prices have hit a record high (“Central Bank defends inflationary easing of mortgage rules amid cost-of-living crisis”, Business, October 19th).

The Central Bank has consistently indicated that house price inflation would be more severe without the rules. That moderating impact is now likely to be weaker, especially at the lower end of the market, as additional credit enters the market, particularly with nominal incomes rising. Even if, as the bank suggests, factors such as rising interest rates and the rising cost of living may play a role in moderating prices, their level is likely to be higher than it would be without relaxation of the rules.

The governor has suggested that the resulting increase in prices is likely to be “modest”. With the CSO price index nationally having exceeded even the precarious pre-crash peak, to regard any further increase as “modest” might almost evoke a sense of Swiftian satire.

Allowing buyers to borrow more may enable them to pay higher prices, but this does not address the substantive issue of lack of moderately priced housing. It is understandable that estate agents, banks, and some buyers might welcome the changes. However, what might be beneficial to some individuals, or particular interests, in the short term, may not be in the longer-term collective interest. – Yours, etc,

READ MORE

D CONLAN,

Celbridge,

Co Kildare.

Sir, – We have yet to see if the new lending rules will enable more people to buy a home. In a time of recession in the mid-1980s, when there was also a scarcity of new builds, the rules allowed borrowings of only 2½ times one’s earnings. It was necessary to save the equivalent of at least 15 months of taxed income.

In light of this, the new rules seem extraordinary. – Yours, etc,

MARION WALSH,

Donnybrook,

Dublin 4.