New savings scheme recommended

Saipanne

In the Irish Times today, the Housing Agency recommend introducing a state backed, dirt free savings scheme, lasting two to three years, aimed at taking heat out of housing bubble in greater Dublin. The thinking being, people use the scheme to save for a deposit while the housing stock grows.

I can't link since I am new. In principle, I think it is a good idea. Thoughts?

dharma200

I think the part 'when housing stock grows' was when i opted out.... lots of lolz, and the irish times doing its usual.....

Saipanne

Ah, the Irish Economy forum... (now where's the ignore button)

comongethappy

Many purchasers are cash only, so no deposits.

Of the rest, those that can buy, will do now anyway while its more affordable & if they find a property they desire.

Taking a 20k nest-egg at a very generous 3% interest, a DIRT exception would yield the saver an extra €240.

If I found a house I loved & if the price was right, getting €240 a year from now wouldn't stop me buying today.

_Kaiser_

SSIA 2 after all?

comongethappy

Kaiser2000 wrote: »

SSIA 2 after all?

Nothing like it tbf.

Godge

Not a chance, the savings ratio has shot up since the recession with people paying down debt and putting something away for a rainy day.

The Government would be mad to do something when what they really need is an increase in consumer spending.

No Pants

A savings scheme might keep prices low now, but they'll jump to compensate when the savings accounts mature. Besides, in the past couple of years the banks have successfully lobbied the government to reduce the rates offered by An Post. Can't see them letting this go ahead.

hmmm

Is there some sort of opt out button I can use for this madness? Our economic recovery strategy appears to consist of restarting the bubble, and many if not most of the population are happy to go along with this. When it all blows up again, is there some way I can protect myself from this collective lunacy?

The British are looking at capping mortgage multiples. We're looking at starting up a savings scheme where you are forced to buy a house at the end.

Saipanne

hmmm wrote: »

Is there some sort of opt out button I can use for this madness? Our economic recovery strategy appears to consist of restarting the bubble, and many if not most of the population are happy to go along with this. When it all blows up again, is there some way I can protect myself from this collective lunacy?

The British are looking at capping mortgage multiples. We're looking at starting up a savings scheme where you are forced to buy a house at the end.

Forced?

hmmm

Saipanne wrote: »

Forced?

Per the article, the money will be free of DIRT tax & at a slightly higher interest rate than a deposit account. If you don't use the money to buy a house you will have to repay any DIRT tax that was deducted & any extra interest, which is as good as forcing people to buy a house or else.

Farmer Pudsey

I can see advantages and disadvantages to OP's proposal. most on already jave highlighted the disadvantages. It is not an SSIA type proposal as it is only proposing to not have dirt on the account. Whay limit it to 3 years, why not encourage those that are young to save.

One of the biggest issue that faces those buying houses is the deposit. You could adjust the scheme where you had to have a 15% deposit because of thsi. You could limit the scheme to first time buyers. While the saving ratio has shot up it is not the younger generation that has same.

Encouraging saving by the younger generation is a good idea. You could modify the scheme where it could be used as part of a pension plan. encourage them to save the money and then use it in 3-5 years to start a pension and give them pension tax relief then.

We have huge time bomb down the road. Pensions are one that need to be addressed. Educational savings is another for to put childern through college. Encouraging longterm savings is a goo idea.

I would agree with the UK there should be set income multiples for mortgages.

Saipanne

hmmm wrote: »

Per the article, the money will be free of DIRT tax & at a slightly higher interest rate than a deposit account. If you don't use the money to buy a house you will have to repay any DIRT tax that was deducted & any extra interest, which is as good as forcing people to buy a house or else.

Not really forced, then.

Farmer Pudsey

hmmm wrote: »

Per the article, the money will be free of DIRT tax & at a slightly higher interest rate than a deposit account. If you don't use the money to buy a house you will have to repay any DIRT tax that was deducted & any extra interest, which is as good as forcing people to buy a house or else.

It is unlikly you would have to pay back any interest as the rates could be near enough regular saving rates that are there at present. What would the DIRT amount to .

If you saved 30K over 3 years with an interest rate of 3% the dirt would amount to about 550 euro. Not a game changer when buying a house. However it would incentivise saving in the younger generation which is a good idea.

Nody

Farmer Pudsey wrote: »

I iIf you saved 30K over 3 years with an interest rate of 3% the dirt would amount to about 550 euro. Not a game changer when buying a house.

This I agree with but then you state:

However it would incentivise saving in the younger generation which is a good idea.

How can something which is not a game changer suddenly going to act as an incentive for saving for a younger generation? It's 550 EUR; it's saving 52 cent a day extra. Who gives a damn young or old? Only way something like this would work would be for a bank to directly tie it to a loan at the end; let's say you get to borrow 6x the amount saved in the time period towards a house or similar.

Saipanne

Nody wrote: »

This I agree with but then you state:
How can something which is not a game changer suddenly going to act as an incentive for saving for a younger generation? It's 550 EUR; it's saving 52 cent a day extra. Who gives a damn young or old? Only way something like this would work would be for a bank to directly tie it to a loan at the end; let's say you get to borrow 6x the amount saved in the time period towards a house or similar.

Good idea.

Farmer Pudsey

Nody wrote: »

This I agree with but then you state:
How can something which is not a game changer suddenly going to act as an incentive for saving for a younger generation? It's 550 EUR; it's saving 52 cent a day extra. Who gives a damn young or old? Only way something like this would work would be for a bank to directly tie it to a loan at the end; let's say you get to borrow 6x the amount saved in the time period towards a house or similar.

Loads of people are interested in saving. A lot is physological, people hate paying tax. They also want to beat inflation. If you put in place a structure that slightly rewards them, they can still access there money if they decide to go on holiday, to Australia or the World Cup. You could also allow lump sums to be deposited so that if they won 10K in local,soccer lotto they could put it away.

We have tended to look for big solutions, housing grants, interest tax relief etc. However if you spend 5-6 years putting 30K togeather you will not be foolish with it.