Thousands of middle-income homebuyers stand to benefit from a historic affordable housing program.
t is designed to bridge the gap for those whose income is too low to afford a mortgage large enough to buy their first home.
First Home’s equity stake plan is set to roll out in early July, with €400 million in funding from the government, the Irish Independent has learned.
All three major banks have signed on to the scheme which will see the state provide an interest-free stake of up to 30% in the house.
It should cover the purchase of 8,000 new homes over the next four years.
The high-profile measure has been delayed but is now expected to be in place from the end of the first week of July, Housing Minister Darragh O’Brien said.
Under this program, the purchase of new homes must be financed jointly by the state and participating mortgage lenders.
AIB, Bank of Ireland and Permanent TSB are on board for the program, and other lenders are expected to sign up.
The flagship First Homes program of the government’s Housing For All strategy will not impose any income limit on those who apply.
However, there are limits to the value of properties that will be eligible for the scheme in each local authority area. Limits will be based on the median value of a new home in the area.
The new program should be well received by the busy community, which is surprised to pay exorbitant rents.
These people earn too much to qualify for social housing, but too little to
qualify for a mortgage in a real estate market where values are back near Celtic Tiger highs.
It comes at a time when Mr O’Brien is under sustained pressure, with President Michael D Higgins recently calling housing policy in this country a “disaster”.
Mr O’Brien said he and his officials had been working on the program for two years, gaining clearance from the European Union, the European Central Bank and the Central Bank here.
“I think this program has the potential to be a game-changer for this group of people who can’t buy because of the gap between the funding they have and the funding they need. It will quickly make a difference.”
He said more money than the initial €400m is likely to be invested there.
Non-bank lenders were eager to sign up. Mr O’Brien said the scheme would encourage builders to provide more homes for first-time buyers.
“I’m aiming for 2,000 homes a year for the next three years under this program, and we could do more.”
He rejected suggestions that the scheme would add to inflation in the housing market.
“This represents 75 million euros per year in a mortgage market of 15 billion euros. It’s a tiny percentage and it’s focused and calibrated,” O’Brien said.
The First Home program will be led by Michael Broderick, a former Home Building Finance Ireland executive.
Typical beneficiaries of the scheme would be a couple with an income of €70,000, who want to buy a new house for €320,000.
After putting down a deposit of 10pc, the maximum they can borrow is €277,000. This leaves a gap of €43,000.
First Home would provide this amount in the form of equity, interest-free for the first five years.
This couple could also benefit from the state’s purchase assistance program, which generally offers tax relief of up to 20% of the property’s value.
First Home will apply to first-time buyers, but also to divorcees and bankrupts.