By Dan White
Thursday April 16 2009

AS pressure mounts for the banks to pass on interest rate reductions to fixed-rate mortgage borrowers, the Government should turn a deaf ear to the controversy. With most of the banks likely to be majority state-owned shortly, the cost of any "rescue" for fixed-rate borrowers would be largely borne by taxpayers.

Someone with a €300,000 variable-rate mortgage repayable over 30 years has seen their monthly repayments plunge from €1,750 per month to just €1,224 per month, a saving of more than €500 per month.

Meanwhile, the tens of thousands of homeowners who are locked into fixed-rate mortgages can only look on enviously as they continue to pay the previous, higher rates. Not surprisingly, with household budgets stretched as tight as a drum, some fixed-rate mortgage holders have argued that the banks and/or the Government should "do something" about the plight of fixed-rate mortgage borrowers.

So what should the Government and/or the banks "do" about this situation?

Preferably as little as possible.

Let's get real here. We're all consenting adults. The vast majority of those who took out fixed-rate mortgages knew exactly what they were doing. They wanted the security of knowing that their monthly repayments wouldn't increase if interest rates rose. And, when the ECB raised interest rates from 2pc to 4.25pc between December 2005 and July 2008, they reaped the benefit. Meanwhile the vast majority of homeowners who had opted for variable-rate mortgages had no option but to pay up.

Now that the boot is on the other foot it is fixed-rate mortgage borrowers who are losing out. Having been the beneficiaries of rising interest rates up to the middle of 2008 they are in a poor position to complain now that rates are falling.

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Wednesday, April 01, 2009
Jennifer Hough

THOUSANDS of over-valued "affordable houses" bought by councils at boom prices are lying vacant because people cannot afford to buy them.

Figures from the Department of the Environment reveal that the number of affordable units has risen 40% — from 2,200 at the end of 2007 to 3,700 today.

Officials are concerned they may only be able to sell off about half the current stock, making the additional 2,270 houses coming on stream this year very problematic to offload.

By Shane Phelan and Denise Clarke
Monday February 16 2009

A CONTROVERSIAL Government plan to get first-time buyers on to the property ladder can today be unmasked as an expensive flop.

Just four people have applied for the Home Choice Loan scheme, which could end up costing the taxpayer almost €300,000 in administration costs this year alone.

As well as a poor take-up, the scheme is also being examined by the European Commission's Competition Directorate, amid claims it breaches State aid rules by effectively attempting to bail out builders unable to sell new properties.

THE GOVERNMENT'S new "Homechoice" loan scheme for first-time house purchasers is being challenged in Brussels on the basis that it is confined to newly-built homes and excludes second-hand and self-build houses.

More than 250 people have lodged a formal complaint to the European Commission's Directorate-General for Competition, claiming that the scheme is anti-competitive and constitutes "unlawful State aid" to property developers.

"The central condition underlining the operation and rationale of this scheme is that only new-build dwellings qualify for the provision of subsidised mortgage finance - to the exclusion of the second-hand and self-build segments of the housing market."

They say this is "for no other reason than that this scheme has been designed from the outset to advantage a defined cohort of vendors".

Traditionally, Government grants to first-time house purchasers - which were abolished in 2002 - were limited to newly-built homes, to the exclusion of second-hand houses.

However, this restriction was never challenged by any complaint lodged with the European Commission.

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The government claims that Home Choice loans are designed to help people who can’t get mortgages because of the credit crunch. Again, this seems a bit bizarre - surely the whole purpose of the €460 billion state guarantee of the banks was to get credit flowing again?

Some members of the government have also claimed that the system replaces the Local Authority Mortgage scheme and is designed to make a dent in the housing lists.

The Local Authority Mortgage scheme had a maximum earnings ceiling of €36,800; the Home Choice Loan scheme is only open to those earning €40,000 or more. And if the housing list is genuinely made up of people earning 20 per cent more than the average industrial wage, then our problems are much worse than we thought.

It simply doesn’t make sense. Unless, of course, you don’t believe that the scheme is really designed to help first-time buyers; unless you harboured a suspicion that the real beneficiaries were, let’s say, the country’s developers.

But this scheme is not just imprudent - it’s unfair too. According to Davy Stockbrokers, there are around 40,000 unsold new homes on the market. But, according to Daft.ie, there are roughly 34,000 second-hand homes for sale for under €300,000. It is the owners of these homes who will be the real victims of this pointless and indefensible initiative.

Our national determination to own the roof over our heads and the polished porcelain tiles under our feet has been responsible for some harebrained initiatives in recent years. But history may yet prove this to be the daftest of all.

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MORE than 200 Irish people have submitted complaints to the EU Competition Directorate over the new housing support scheme announced in the Budget for first-time buyers.

They allege that the Home Choice Loans plan is contrary to competition rules as it only applies to new homes, and is only open to people earning more than €40,000 a year.

The commission will now make a request for information on Home Loans Choice from the Government and on the basis of that, it will decide whether or not to open an investigation.

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