Central Bank set to ease mortgage lending rules

The Central Bank’s key decision-making board is due to consider changes to its controversial mortgage lending rules next Wednesday, with some significant alterations to the existing regime likely to be announced afterwards.

The Central Bank Commission – effectively the board of the bank – will be asked to consider proposals designed to increase the flow of lending, particularly to first-time buyers. However the bulk of the rules will remain, with senior Central Bank figures arguing that they are essential in order to underpin a sustainable market.

Under the rules, introduced in February 2015, mortgage borrowers in most cases must have a deposit of at least 20 per cent of the price of the house. For properties valued at less than €220,000, the required deposit is 10 per cent.

Banking industry sources believe the commission is likely to consider an increase in the number of exceptions each lender can make when granting loans. At the moment banks can breach the loan-to-value lending caps on up to 15 per cent of their loan book. There is speculation that this figure will be increased, possibly to 20 per cent.

Deposit limit

The other likely area for change is thought by industry sources to be the €220,000 limit above which first-time home buyers are obliged to have a 20 per cent deposit. Submissions to the Central Bank have argued that this figure is too low, particularly with house prices continuing to rise. The latest CSO figures show the average house price is now €253,000. The commission is likely to consider raising its €220,000 limit, meaning more borrowers would only require a 10 per cent deposit.

The Central Bank would make no comment yesterday, beyond confirming that the review of the lending rules would be published next week. It had been under pressure to also take into account rental payments as a sign of ability to pay, but the buy-to-rent-scheme introduced in the budget means any change here is unlikely.