Central Bank to release review of mortgage lending rules

Measures introduced last year reduced first time buyer deposit to 10% of property value

The Central Bank of Ireland, New Wapping Street, North Wall Quay. Photograph: Alan Betson/The Irish Times

The Central Bank of Ireland, New Wapping Street, North Wall Quay. Photograph: Alan Betson/The Irish Times

 

The Central Bank of Ireland will today release a review of the mortgage lending requirements last revised in November 2016.

Last year, the Central Bank loosened the rules slightly, with first time buyers required to have a deposit of 10 per cent for house purchases. That marked a shift from the previous requirements whereby first-time buyers had to have a 10 per cent deposit on loans up to €200,000 and a 20 per cent deposit for the balance of loans above that amount.

Second time and subsequent buyers are required to have a 20 deposit, with the banks allowed to make exceptions to this rule in 20 per cent of cases.

A limit of three and a half times income must be applied by lenders to all mortgage applicants.

The mortgage measures were introduced in February 2015 to enhance the resilience of both borrowers and the banking sector, and to reduce the risk of bank credit and house price spirals from developing.

However, the reduction in the deposit required for first time buyers has been criticised as simply contributing to an increase in property prices which are raising at a annual rate of 12.8 per cent, according to figures from the Central Statistics Office on property price inflation in September.

In a client note issued this morning, stockbroker Goodbody said is would be “very surprised” if changes were made to the lending rules in this year’s review.

Goodbody chief economist Dermot O’Leary cited figures released today by the Banking and Payments Federation Ireland, which showed that the volume of mortgage approvals to October grew by 20 per cent. Mr O’Leary noted that the figures show the mortgage market on an upward trajectory, “driven by the first time buyer cohort”.