Over 40% of help-to-buy receivers already had a deposit

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Statistics from the Revenue Commissioners have shown that that over 40 per cent of first-time home buyers that have turned to the Government’s help-to-buy scheme already had the needed deposit amount to attain a mortgage.

These figures were obtained by the Minister for Finance, Paschal Donohoe, after being questioned in Parliament by Sinn Fèin’s Eoin Ò Broin. The help-to-buy scheme figures have shown an interesting trend regarding this government scheme’s receivers. Mainly, that 7,928 of the 19,478 government-approved claims as it currently stands were made by homes that had a loan-to-value (LTV) ratio of less than 85%. What this means is that 40.7% of these government scheme recipients already had a deposit of at least 10%.

The government scheme in question was introduced in 2016 as part of the Irish Government’s Rebuilding Ireland strategy. Before the current pandemic, this scheme provided tax rebates to first-time home buyers up to 5% or €20,000 of a property’s value on the condition that the homes being brought were €500,000 or less.

As a result of the financial turmoil that came as a result of the pandemic, this relief was increased to 10% or €30,000 of a property’s value, whichever one was higher. The condition requirement for the scheme remained unchanged from the 2016 version.

The Irish government’s goal for the scheme was to stimulate the affordable homes supply in the market within a set price range. Furthermore, this scheme was designed to also help first-time buyers with getting a deposit. Critics of the government’s scheme claim that the scheme benefits households that are on the higher part of the income spectrum and supports higher home prices.

The Revenue figures don’t paint a pretty picture for the scheme’s supporters. According to the Revenue statistics, 56% of help-to-buy receivers used their rebate to buy homes that were worth more than €300,000. Furthermore, 22% used their rebate to purchase homes worth €376,000 and higher.

To explain why this isn’t the best thing in the world, you need only look at the median price for a property in Ireland during the last 12 months up until May 2020. According to the Central Statistics Office, that median property price in Ireland during the last 12 months up until May 2020 was just below €300,000.

These statistical results have only given more ammunition for the scheme’s current critics. Using these statistics, Mr. Ò Broin questioned why the State’s scheme is being used to help people buy homes that are higher than Ireland’s median home price. Mr. Ò Broin’s comments echoed the Parliamentary Budget Office’s Report in December 2019, which stated that the current scheme was priced too lavishly and stated that a large number of home transactions would have taken place with or without the scheme.

This article was written by Ian, an intern at Irish Mortgage Brokers and Yes.ie from the USA.