LOCAL authorities are to be allowed to grant mortgages of close to €300,000 to those on low pay and unable to get home loans from banks.
Under the scheme, borrowing limits will be increased from the current €185,000 figure to “just under €300,000”, if the cabinet gives final approval.
Environment Minister John Gormley, whose department has responsibility for housing, presented a memo on the issue to the cabinet yesterday. While final figures have yet to be confirmed, spokespersons said there was agreement in principle to the plan, which will likely be announced in tandem with the budget.
The size of the increase in borrowing limits may prompt claims that the Government is interfering with the property market. Several leading economists have called on the Government to allow the current correction in the market take its natural course, which would see prices continue to fall and come back into line for first-time buyers. The Government believes the proposal would not affect the correction. The source said the size of the increase would not serve to push up prices. Instead, it would assist those unable to get mortgages from banks because of the credit crunch.
This week, Taoiseach Brian Cowen insisted the Government would not intervene to “artificially inflate” house prices. It would use Mr Gormley’s proposals instead.