Wednesday 20 February 2019

Central Bank boss warns about 'risk of reverse in house prices'

Governor Philip Lane appeared before the Finance Committee
Governor Philip Lane appeared before the Finance Committee

House prices could fall in the next three years, the governor of the Central Bank has warned.

Philip Lane predicted a number of factors, such as increasing supply, will lower sale values and acknowledged there is currently an "affordability crisis" in the market.

The Central Statistics Office (CSO) reported this week that national home prices soared by 12.7pc in the year to March.

Mr Lane said property experts expect prices to rise by about 15pc over the next three years but told the Oireachtas Finance Committee that he is "troubled" by expectations in some quarters that house prices will continue to rise unabated.

"I do think there's a material risk of a reverse in house prices," he said. "We should all be less concerned about trying to forecast and more concerned about trying to manage the risks.

"As more houses get built, that will put downward pressure on house prices.

"This is why we have our mortgage rules - in order to avoid the risk of excessive debt being taken on at exactly the wrong time."

He said the rules limiting how much money banks can lend to house buyers ensure that "only those who are financially prepared for it, can take on a mortgage".


Mr Lane added that external factors, such as Brexit and international trade issues, could also weigh on house prices over the next few years.

"There are multiple reasons why this kind of positive momentum now may go into reverse," he cautioned. "I'm not expecting it. I'm just saying it's a material risk. It's something you should plan for."

He said that broader European Central Bank policy means monetary interest rates are unlikely to "move dramatically" in the years to come, but that banks price mortgages based on a five-to-eight year horizon, and "there's a risk they could move".

In a quarterly update to the committee, Mr Lane also said that 3,400 new tracker mortgage cases have identified since the end of December, bringing the total to 37,100 at the end of March.

There are also around 1,500 unverified cases which are still being assessed to see if they also require redress.

By the end of March, 88pc of borrowers hit by the controversy had agreed redress with banks, and a total of €459m had been paid out in compensation.

That is €162m more than had been paid out by the end of December.

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