New Zealand Central Bank Governor, Gabriel Makhlouf, arrived here from New Zealand under a cloud. It was a small cloud involving neither corruption nor incompetence, and was insufficient to convince those who recruited him that his expertise and experience did not fit the bill.
Nevertheless, it seems to have encouraged politicians, banking chiefs and others to pile in on the governor in an effort to get him to relax the rules that regulate the mortgage market. But the governor is not for turning.
The argument put forward in favour of an element of deregulation suggests that more people need to be assisted in getting a mortgage so they can get a foot on the property ladder; and that this, in turn, will help relieve pressure in the rental sector.
This presupposes that everyone has an entitlement to own their home and that renting is a only a temporary and, in some ways, inferior form of housing. But in this age of practically full employment, it may be true that almost anyone who wants a job can find one. But it does not follow that almost anyone can earn a wage that would support a mortgage.
The main restriction on the mortgage market is the limit of three and a half times’ gross annual income which some feel is too little because of current house prices. But this is not meant to equate to the price of a house, unless we are going to go back to 100pc mortgages. It is also meant to encourage saving for a deposit.
To do otherwise is to risk a return to the situation where property buyers take on unsustainable debt and could end up losing their homes. Current prices, according to the Central Bank, would be 26pc higher than they are if restrictions had not been applied. As it is, house prices rose 1.1pc in the year ending September last. Those calling for deregulation seem to have forgotten the lessons of the very recent past and appear willing to take a dangerous chance with the economy.
However, if the governor can get across the message that change of the type sought is not coming – and he could hardly have made his intentions in this regard more plain when he stated that the regulations are “a permanent feature of the Irish market” – then the mortgage market will absorb this position and adjust accordingly, perhaps even allowing for a little more reality to come into the price structure. For it is more affordable houses for purchase that are needed, not access to cash to fund current unrealistic prices.
It is true that the mortgage market and the rental sectors are allied, but they are not necessarily inextricably linked, certainly not to the extent that only a liberalisation of mortgage rules can solve the crisis in renting.
The rental market needs specific measures aimed at curing its ills, as it follows the mortgage market with an upward spiral of 5.2pc in the year to September last. These measures relate largely to the rights of tenants and landlords, as well as the creation of a public housing stock for rent at affordable rates.
Some see constitutional protection of some property rights as inimical to the common good in this regard, but there is much that can be done as things stand. However, if it can be shown that constitutional change is necessary to achieve equity and fairness, and end the curse of homelessness, the Government should not shy away from such action.
But in the meantime, a much more radical and pro-active approach than we have seen heretofore, is needed; and needed urgently.