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Interest rate hike in state’s home loan scheme

The Government has sharply increased the rate of interest it will charge future first-time home buyers availing of its Rebuilding Ireland Home Loan scheme.

As a result of the changes, the 25-year fixed rate has increased to 2.745% from 2%, while the 30-year fixed rate has risen to 2.995% from 2.3%.

The move means those who in future borrow the maximum amount allowed of €288,000 will pay up to €107 more per month than those who already have their loans.

The decision comes despite growing pressure on commercial lenders to reduce mortgage interest rates here, as they are among the highest in Europe.

“In an environment where interest rates are benign and we are asking banks to reduce interest rates, it seems bizarre that Government funded mortgage products are increasing rates,” said Michael Dowling, Managing Director of Dowling Financial.

The changes also coincide with moves by certain banks to lower fixed home loan rates in an effort to attract new business.

Yesterday, for example, Ulster Bank announced a reduction in its five-year fixed rate to 2.2%, the lowest rate in the market.

Introduced in February 2018, the Rebuilding Ireland Home Loan scheme is designed to help first-time buyers on lower incomes who have been refused a mortgage by a bank.

The mortgage can be used by the borrower(s) to buy a new or second hand home, or to build their own home. 

Up to 90% of the value of the property can be borrowed under the scheme, although the maximum market values have been capped at different levels depending on the location of the property.

In counties Cork, Dublin, Galway, Kildare, Louth, Meath and Wicklow this is €320,000 while in the rest of the country it is €250,000.

Rates are fixed and both 25-year and 30-year options are available.

As the Rebuilding Ireland Home Loan rates are fixed for the duration of the mortgage, the rate changes will only apply to new loans.

In future, a 25-year Rebuilding Ireland Home Loan mortgage of €288,000, which is the maximum loan amount available, will require repayments of €1,328 per month, €107 more than that being paid by recent borrowers.

While a 30-year mortgage worth €288,000 will cost €105 more per month that it would have under the old rates, bringing repayments to €1,213 per month. 

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