The Central Bank’s decision to increase the amount an individual can borrow for a mortgage will only push up prices further, the founder of a consumer forum has warned.
Currently someone can borrow three and a half times their salary. However, following a year-long review, the bank is expected to announce it will increase that figure to four times.
Speaking to Newstalk Breakfast’s Ciara Kelly, Brendan Burgess of Askaboutmoney.com said it was the wrong way to tackle the housing crisis.
“At the moment, it’s very expensive for people to buy houses,” he said.
“If Ciara can’t borrow enough money to buy a home and they give her an extra €50,000 that’s great but if they give everybody an extra €50,000, all it does will push the prices of the houses up.
“So, Ciara gets the same house but she’s just going to be paying more for it and she’ll have a higher mortgage for the rest of her life or the next 20, 25 years.
“So it doesn’t really make that much of a difference.
“It’ll push up the price of houses which should, in theory, increase the supply of houses a little bit but this does not resolve the problem.
“The problem we have in Ireland is that it is too expensive to build houses and at the same time people on good salaries can’t afford to buy houses.”
The Government looks set to ditch a 10% levy on concrete blocks after being warned the cost would be passed onto consumers and push up prices even further.
However, Mr Burgess said that a more general debate is needed about why the cost of construction was so high.
“So there’s a peculiarity there and [what] the Government needs to do is look at why it costs so much to build new houses?” he said.
“If we bring down the price of building houses, we can address this problem but we won’t address this problem by adding more money [to the amount a person can borrow].”
Rents in Ireland have soared by 12% in the space of a single year and Mr Burgess said this is an additional barrier to homeownership.
“They’re still going to need a 10% deposit, which is difficult for people to get together - particularly when they’re paying high rents,” he said.
“But if people think this is going to solve the problem, they’re going to be really disappointed.”
Main image: A house in County Kerry. Picture by: Alamy.com