The government did not consult the Central Bank before announcing a new low-cost mortgage scheme for first-time buyers.
Under the scheme announced this week by Eoghan Murphy, the housing minister, new state-backed loans will give first-time buyers access to low- interest fixed-rate mortgages.
The government will fund local authorities to provide mortgages to those earning no more than €50,000 on their own or a maximum of €75,000 for couples. Borrowers will be able to choose a fixed rate of 2 or 2.25 per cent over a 25 or 30-year term.
Concerns have been raised that the scheme will increase the availability of credit in an undersupplied housing market and drive up prices as homebuyers seek to outbid each other.
The Central Bank, which has a mandate to ensure stability across the financial markets, introduced mortgage lending rules at the beginning of 2015 to curb reckless lending and protect the stability of the mortgage market.
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In some cases the government’s scheme will breach the Central Bank’s mortgage lending rules, which drew criticism from both Eoin Ó Broin, the Sinn Féin housing spokesman, and Joanna Tuffy, the Labour spokeswoman on affordable housing.
The government has also been accused of engaging in sub-prime lending by encouraging into the market people commercial banks have turned away.
A spokesman for the Central Bank said the regulator had not been consulted by Mr Murphy’s department before the announcement of the scheme.
“Local authorities are not regulated financial service providers and therefore do not fall within the scope of the Central Bank’s mortgage measures,” the spokesman said.
The mortgages will be available to those buying properties up to €320,000 in the greater Dublin area, Cork and Galway. In the rest of the country loans will be capped at €250,000. About €200 million has been set aside for the scheme this year to support 1,000 loans.