New council mortgage scheme to offer lower rates than most banks

  • Affordable Mortgage Scheme will begin on February 1
  • The loan can be used both for new and second-hand properties, or to build your own home
  • Income limits and maximum house price limits part of scheme

FIRST-time buyers will be able to get a loan worth up to €288,000 with an interest rate of 2.25pc for 30 years under the Government’s latest plan to tackle affordability in the housing market.

The new Affordable Mortgage Scheme offers lower rates than most banks – and significantly, the interest will be fixed for the duration of the loan.

Housing Minister Eoghan Murphy will today announce details of the scheme along with new proposals for building more mid-price homes and ensuring long-term affordable rents.

The Rebuilding Ireland Home Loan, which is likely to save homebuyers up to €10,000 over the lifetime of a mortgage, will be run by local authorities from February 1. It will be subject to the same lending rules as ordinary banks, which currently offer first-time buyers interest rates in excess of 3pc.

The Government loan can be used both for new and second-hand properties, or to build your own home.

But to qualify, an individual’s annual gross income cannot exceed €50,000, or in the case of a joint application €75,000.

There will also be a limit on the price of a home that can be bought from the scheme. In the Greater Dublin Area, Cork and Galway, the maximum market value is €320,000. In the rest of the country, it is €250,000.

House hunters looking to avail of the deal must also have had two insufficient offers or refusals for a mortgage from two lending institutions.

Mr Murphy said the scheme would offer buyers “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,” he said.

The minister will also use a housing summit in Dublin today to announce an affordable purchase scheme that will see affordable homes built initially on State land.

The State will retain an equity in all discounted homes sold. For example, a house that costs €250,000 may be made available to purchase at €200,000. 

The equity share can be paid off, interest free, by the purchaser at a later date. Or if the owner wants to sell early, the State can take that portion back at the time of sale.

Details of the full qualifying criteria have yet to be finalised ahead of a launch next month, but it’s understood the same income limits as under the Rebuilding Ireland Home Loan will apply.

Mr Murphy said that there were four “major ready-to-go sites in Dublin being advanced through procurement with construction likely to start before year-end”.

The third element of the minister’s announcement today will be an affordable rental scheme.

This will be done using a model that sees rent charged based on the cost of building the property, together with ongoing management and maintenance charges, but with a minimal profit margin included.

A pilot project on this initiative is under way in Dún Laoghaire-Rathdown County Council, in conjunction with the Housing Agency and an approved housing body, using publicly owned land.

The minister is in discussions with the European Investment Bank about cost rental and other affordable models that could work in Ireland.

David Kieran