FINANCE Minister Brian Lenihan last night denied the Government was set to become a "sub-prime lender" after more details of a state-backed mortgage scheme emerged.
The new scheme applies to anyone who earns more than €40,000 but has been refused a loan from the banks or building societies.
It is understood there will be a €500m fund for the scheme, with successful applicants offered standard variable rate mortgages only, with rates of between 5.35pc and 5.4pc following the European Central Bank rate cut.
Critics have argued that it will stop house prices falling to their natural level.
But Mr Lenihan insisted the new housing scheme would not distort prices in the housing market, and he dismissed charges that the Government was attempting to support builders by providing funding for buyers of new houses.
Mr Lenihan told RTE Radio 1's 'Today With Pat Kenny' that the State had always helped people to acquire homes.
First-time buyers will be able to draw down a mortgage of up to €285,000, and a maximum loan of 92pc of the value of the home, for up to 30 years.
Housing Minister Michael Finneran said in a statement yesterday that the new Home Choice Loan would not interfere with the correction in housing prices currently taking place.
The mortgages will be provided through brokers with four local authorities -- Cork, Galway, Kilkenny and Dublin City Council -- acting as lending authorities.
There were no details yesterday on the number of houses that will be funded through the scheme or the likely cost. A new website, www.homechoiceloan.ie, has been set up to allow people to register their interest in availing of the state mortgage. The interest rates will reflect market rates, a spokesman for the Department of the Environment said.
Applicants
To qualify for a Home Choice Loan, applicants must be first-time buyers, earn over €40,000 per year and be in permanent employment for two years. If self-employed, applicants must be able to submit two years financial audited accounts.
Applicants also have to provide proof that they have been unsuccessful in securing a sufficient mortgage from a bank or building society to buy a home.
Financial adviser Karl Deeter, who has campaigned against state support for builders, said the scheme was "a blatant attempt to secure the future of those represented by Tom Parlon and the Construction Industry Federation".
- IRISH INDEPENDENT, Charlie Weston (Personal Finance Editor)
