Loan experts and opposition politicians have warned that homebuyers could end up in higher debts and in borrowing trouble after the Central Bank changed its mortgage lending rules.
The Central Bank now recommends that lenders can give out mortgages to first time buyers worth four times their annual income - this is up from three and a half times.
This will make it easier for people to get bigger mortgages on smaller incomes.
Read More: Central Bank governor backs mortgage rule change which will push up house prices
For instance, a person or couple on €50,000 a year will now be able to get a mortgage worth €200,000, up from €175,000 under the current rules.
If you are moving up the property ladder and buying your second home, the rules have been tweaked here too.
Under the new rules from January, you will no longer need a 20% deposit for your second home purchase, this will be eased to 10%, the same as for first time buyers.
However, some lending analysts and experts have warned that the changes could lump people with greater levels of debt.
The rules were originally introduced in the wake of the economic crash in 2015 to prevent this very thing from happening again.
Sinn Féin’s finance spokesman, Pearse Doherty, has said the changes have had to be introduced because the Government has failed on housing.
But he warned of the risks of overburdening people with more debt again.
“It is clear that the regulator has decided to loosen the lending rules as a result of the government’s abject failure in housing - low delivery, spiralling house prices and a generation locked out of home ownership.
“This is not without its risks, and I am deeply concerned by the Central Bank’s acknowledgment that these changes will increase house prices and lead to greater mortgage debt for households - especially at a time of rising interest rates.
“The reality is that the government’s housing failure has pushed the regulator into a space where higher house prices and mortgage debt is seen as a solution to affordability issues in the housing market.
“The government need to recognise that their housing plan has failed and the housing crisis is only getting worse.
“The only real and sustainable solution is a greater delivery of social and affordable housing.”
Brokers Ireland’s Director of Financial Services, Rachel McGovern, warned that those on lower incomes will become more indebted under the new eased-up lending rules.
She said: “There are many, particularly those on average incomes and without the benefit of family financial support, who have lost out on the cheaper properties of recent years because the 3.5 times limit was too restrictive.
“Such aspiring mortgage holders are now faced not just with much higher property prices but increasing interest rates.
“That loss is likely to reverberate in weaker financial wellbeing throughout their lives, unless we see a major drop in property prices, which would appear unlikely given the lack of supply and strong demand.”
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