Central Bank would ‘absolutely’ change mortgage rules if required

Regulator due to publish review of homeloan restrictions next month

Deputy Central Bank governor Sharon Donnery said it was clear the impact of Brexit on the economy would be “negative and material”.

Deputy Central Bank governor Sharon Donnery said it was clear the impact of Brexit on the economy would be “negative and material”.

 

Central Bank deputy governor Sharon Donnery has signalled that the regulator will resist attempts to change mortgage rules frequently even as the current lending caps are not set in stone.

In an interview with Bloomberg television, Ms Donnery said the Central Bank would “absolutely” change the mortgage rules, brought in early last year, if required.

The comments come after Ms Donnery last Saturday gave her clearest indication yet of a reluctance to change the rules as a first review of the restrictions is published next month.

Under the Central Bank rules as they stand, most first-time buyers need a 10 per cent deposit for the first €220,000 of a house price and 20 per cent for the balance, while 85 per cent of other home loans must have a 20 per cent deposit in place. In addition, the Central Bank requires that lending limits of 3.5 times income are applied by the banks before approving mortgages.

A recent consultation process, which will inform the bank’s review, yielded 50 submissions, several of which called for the threshold below which first-time buyers have to pay only a 10 per cent deposit to be raised from the current level of €220,000.

Fragility

Meanwhile, speaking separately at a conference in Dublin on Thursday, the deputy governor said non-performing loans continue to “contribute to banks’ balance sheet fragility, impinge on profitability and strain capital buffers, impeding bank lending.”

However, a continued “deliberate and determined work-out” of soured loans, together with an improving economy should reduce the burden of bad loans, she said.

Still, the outlook for the economy is complicated by the outcome of the UK referendum decision in June to quit the European Union.

“The economic impact of Brexit on Ireland is difficult to estimate with any precision,” she said. “It is clear, however, that the impact will be negative and material, both in the short-term and in the longer term.”

The long-term impact will be influenced by the nature of the withdrawal agreement between the EU and the UK and the subsequent evolution of both economies, she said.