Article by Sarah Collins Irish Independent 25th November 2021

Lenders will be able to take part in the government’s shared equity home buying scheme, despite a Central Bank fear that it could push up house prices.

In its second financial stability review of 2021, the Bank said it would amend its mortgage measures to clarify that retail banks can participate in the scheme.

Central Bank Governor Gabriel Makhlouf said on Thursday that it would have to “wait and see” what the effect will be on house prices, and that much will depend on housing supply.

“Any measures that – as these are – that support demand for housing will have an impact on house prices. I mean it’s basic economics that if you support increased demand you’ll see a reaction which moves prices upwards,” Mr Makhlouf told reporters.

“We don’t think that allowing the banks to participate in it is going to put financial stability at risk. And if supply doesn’t respond at all, obviously it’ll have a greater impact on prices than if supply did respond.”

The shared equity – now known as ‘First Home’ – scheme was first floated last year and was included in the government’s ‘Housing For All’ plan in September.

It would allow first-time buyers on moderate incomes to buy new homes at reduced prices, with the State and participating banks paying up to 30pc of the cost in return for a stake in the property.

The Government had asked the banks to match its €75m investment in the scheme.

But existing mortgage rules cast doubt on the whether banks can participate in the scheme, the Central Bank said.

Meanwhile, the Bank is also looking into imposing limits on how much property funds can borrow to invest in assets in the Irish commercial real estate market.

Funds now hold 40pc – or €23bn – of all the “investable” commercial real estate in Ireland, the Bank said, with Irish-resident funds tending to leverage more than their European peers.

This creates “additional vulnerability to price falls, which could lead to selling pressures in the market” the Bank said in its review.


It launched a public consultation on new leverage limits liquidity measures for property funds on Thursday.

In the financial stability review, the Bank also announced no change to its measures on loan-to-income and loan-to-value lending limits, and said it would maintain its counter-cyclical capital buffer at 0pc for the time being.

However, Mr. Makhlouf said the aim was to increase it to 1pc after the pandemic.

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