“The effect of trapping long-term renters in high rents is that the mortgage rules are actually inflating the rental market and driving up housing costs for a huge cohort of the population.”
She said the Central Bank is essentially ignoring the plight of reluctant renters who are financially able to service a mortgage but can’t save the deposit required to obtain one whilst they are paying the current exorbitant rents.
Ms McNally said that today’s data from the Daft.ie shows yet again that renters are currently facing exorbitant rents making it virtually impossible for most people to simultaneously pay rent and save for a deposit. Both the RTB and the Daft.ie register show that average rents are now 30% higher than they were at the peak of the boom.
The last DAFT.ie data showed that most mortgages needed to buy most properties cost substantially less per month than average rents for similar properties. In some cases, a mortgage is half the cost of the rent yet those who are stuck paying the current excessive rental amounts find it impossible to simultaneously save for a deposit in order to access a mortgage they could clearly service.
Ms. McNally said:
“The Central Bank brought in new mortgage rules over the past few years restricting the amount of mortgage that can be taken out by basing it on income and requiring a minimum level of deposit. Most of these rules are very welcome and help prevent people from over-borrowing and taking on mortgages they simply can’t afford. However, long-term renters are trapped by the new rules. Long-term renters are paying record rents, which prevent them from saving for a deposit, which in turn means they can never qualify for a mortgage and so are locked into their high rent.”
“If you take examples from the DAFT.ie figures you will see that for a two bedroom house, the monthly cost of renting in Dublin 12 is €1,637 whereas a mortgage for similar properties in the same area is €962. In Cork, the rent figure is €1,115 and the mortgage €629. In Limerick it’s €960 for rent and €454 for mortgage. In Galway, it’s €1,026 and €612. Similar data was published recently by Cairn homes showing that it’s 42% cheaper to buy in a Dublin 13 development than to rent.
“The effect of trapping long-term renters in high rents is that the mortgage rules are actually inflating the rental market and driving up housing costs for a huge cohort of the population. A measure designed to prevent people taking on mortgages they can’t afford has resulted in them taking on rents they can’t afford. Neither situation is sustainable.
“We are calling for a common sense approach to this issue and for the Central Bank to revise its mortgage rules as they apply to long-term renters. There are plenty of renters who could potentially, with a slight change in regulations, become home owners rather than renters. We are in exceptional circumstances and therefore need exceptional solutions. If someone has proven their ability to service a rental amount for a specified period of time then we suggest this could be taken into account by financial institutions when considering the deposit payment required for a mortgage.”
12th November 2018