‘Serious consequences’ of 20% deposit rules

Proposed requirements by the Central Bank on potential homebuyers to ‘stump up’ 20% deposits will have serious consequences for young people’s futures, insurance brokers have warned.

The Professional Insurance Brokers’ Association (PIBA) has claimed that the requirements are a ‘fait accompli’.

Rachel Doyle, Chief Operations Officer said: “If the Central Bank insists on the majority of mortgage applicants having to come up with 20% of loans, the consequences will be far more far reaching than many realise.

“It will impact young people’s ability to make any other contribution towards their financial future, including prudent pension planning, quite apart from using up, at a very early stage, tax-free family inheritances.

“International practice would indicate that high loan-to-value curbs should be used to limit extreme peaks in house prices and housing credit cycles. They should not be an ongoing feature of a market but rather used short-term to cool an overheating market. We are very far off that now.

“The way in which the Central Bank consultation document is framed leads one to become suspicious – despite recent indications from the Governor – that the regulations are already drafted and are, in fact, a fait accompli.

“One would have to wonder if the motivating factor here has more to do with a sense of self preservation on the part of regulators deeply sensitive to criticisms of past failures. If so, this is hardly a way for any country to allow its policy be shaped.

“Make no mistake about it, if the 20% deposit requirement remains, there will be serious and pervasive consequences. Changes of such a magnitude should only ever take place after careful and detailed analysis, not over the course of a few weeks,” said Ms Doyle.