Government asks Central Bank to ease mortgage deposit rules
Published 08/12/2014 | 02:30
THE Government wants the Central Bank to ease the introduction of strict new rules on mortgage borrowing by introducing the changes gradually.
In a submission to the Central Bank which will be lodged today, the Department of Finance will offer broad support for the regulator's controversial plan to tighten the lending rules while calling for more flexibility in some areas. The regulator asked for suggestions after stunning the property market by revealing that it wants most first-time buyers to save at least 20pc of the cost of a house.
Finance Minister Michael Noonan will specifically say that he wants the Central Bank to introduce a transition period for the changes, rather than forcing borrowers to raise more money from next month. Mr Noonan also wants more people to be exempt from the rules. The Central Bank has said it believes 15pc of people should be exempt from the ban on borrowing more than 80pc of a mortgage.
Finally, the submission urges the Central Bank to focus more on loan-to-salary ratios and less on loan-to-value ratios. The Central Bank said in October than it wants to ban loans of more than three-and-a-half times salary
The Central Bank will begin sifting through submissions tomorrow, but Governor Patrick Honohan has already signalled that he may water down some of the measures.
The Department of Finance has waited until the last moment to issue its submission on the Central Bank proposals; the deadline for submissions closes today.
A group campaigning against the changes will deliver a petition to the Central Bank today. The new group, called Uplift, claimed yesterday the rule will cause more problems than it solves.
The Professional Insurance Brokers Association warned last week that the consequences of the Central Bank's proposals to restrict mortgage lending will be "far more far-reaching than many realise". Rachel Doyle of PIBA said: "It will impact young people's ability to make any other contribution towards their financial future, including prudent pension planning, quite apart from using up, at a very early stage, tax-free family inheritances."
Ms Doyle said the way in which the Central Bank consultation document is framed "leads one to become suspicious, despite recent indications from the governor, that the regulations are already drafted and are, in fact, a fait accompli".
A spokeswoman for the Central Bank said the proposed requirements on deposits and the proposed stipulation that lending cannot exceed 3.5 times income are part of a consultation process. "When the consultation closes we will review all submissions and we will not comment on responses until after that time," she added.