Review of Central Bank’s mortgage rules will have only partial picture

There will be more than a few eyebrows raised at the revelation that Permanent TSB did not utilise the full 15 per cent exemption available to it under the Central Bank of Ireland's rules on loan-to-value (LTV) ratios for house lending last year.

Instead, just 11 per cent of its €459 million in new mortgage lending in 2015 was issued under the exemption. That equates to €50.5 million in mortgages when it could have gone as high as €68.8 million.

The fact that PTSB’s use of the exemption was below 15 per cent was not a surprise in itself. Coming in under the threshold is a bit of a juggling act and banks can never be entirely sure what level of drawdowns they will achieve from the initial approvals handed out.

But the fact that it closed the year some four percentage points below the ceiling set by the regulator was surprising.

This emerged from an answer given by Minister for Finance Michael Noonan to a parliamentary question posed by Sinn Féin finance spokesman Pearse Doherty.

To recap, the Central Bank introduced new rules in February last year that require first-time buyers to have a 10 per cent deposit for the first €220,000 of a house purchase and 20 per cent on the balance. For other buyers, a 20 per cent deposit on the entire purchase price is required.

To give the banks some flexibility, 15 per cent of mortgages are exempt from the LTV rules and the lenders have discretion as to who qualifies for the exemption.

The rules were designed to protect the banks from another property crash, but have proved to be highly controversial.

Many first-time borrowers, particularly in Dublin, where prices are highest, argue that it is almost impossible to save the necessary deposit, especially as they are having to pay such high monthly rents.

The Central Bank is reviewing the rules but has indicated that it would require compelling evidence for it to alter them in any major way. The outcome is due in November.

Mr Doherty also sought figures from AIB and Bank of Ireland, but neither provided data. He points out that this data would help to inform the debate during the Central Bank's review and will ask the regulator to publish the figures. In their absence it would be hard for any party planning to make a submission to provide an evidence-based analysis as to why the rules should be loosened.