The State is stumping up €200m to offer mortgages to sub-prime borrowers

Low-interest loans will be made available to those buying affordable homes.

By Fora Staff

A NEW, GOVERNMENT-backed mortgage scheme for first-time buyers has been announced by Housing Minister Eoghan Murphy.

Aimed at prospective homeowners who don’t qualify for social housing, the mortgages will be able to be used to buy a house valued at up to:

  • €320,000 in the greater Dublin area, as well as Cork and Galway;
  • €250,000 in the rest of the country.

The mortgages, which will be granted through local authorities, will be available to individual applicants whose annual gross income does not exceed €50,000 and to joint applicants who earn up to €75,000.

Speaking on RTÉ’s Morning Ireland, Murphy said that the government was determined to increase the stock of social housing, but added:

“It’s important to recognise that there will be people who won’t be eligible for social housing, but still can’t afford to buy a home at the moment.”

This product, he said, was aimed at those people and “doesn’t exist currently in the market”.

Fixed rate 

The Rebuilding Ireland Home Loan can be used both for new and second-hand properties. A person or couple can borrow up to 90% of the market value of the property.

They can choose a fixed rate of 2% to 2.25% interest for 25 to 30 years. Murphy said in a statement that this would mean buyers would “have absolute certainty of their repayments over the lifetime of the loan”.

“What this means essentially is that a person or couple can purchase a home, while ensuring that they can still keep their monthly repayments to one-third of their net disposable income – with no risk of their mortgage rate rising and so no threat to their ability to afford repayments, giving them certainty and security.”

In one example of how the scheme would work, Murphy said a person earning €40,000 a year and living in Mayo could afford to buy a house worth €224,920, provided they had the deposit of €22,400.

“They could then borrow €198,000 from their local authority and their monthly repayments would be in the region of €858 a month, or 33% of their net disposable income,” he said.

Some €200 million is being made available for the first tranche of mortgages, which it was hoped would provide about 1,000 loans. The scheme will be available from councils around the country from Thursday, 1 February.


To qualify for the scheme, would-be buyers need to have had knock-backs or offers of insufficient funding from two different lenders.

Investec analyst Owen Callan wrote that the mortgages were effectively targeted at “sub-prime mortgage borrowers”, but the plan would be an “additional tool in rounding out access to mortgage financing for the overall market”.

“(The scheme) seems designed to not compete directly with the banks, given the need for refusals of mortgage financing in order to qualify for the scheme,” he said.

“However, we would stress again that a lack of supply of new housing stock remains the biggest impediment for buyers seeking to purchase a home, not access to or the cost of mortgage financing.”

Written by Daragh Brophy and Peter Bodkin.

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