One in eight gets exemption from Central Bank's lending limits
Published 23/07/2016 | 02:30
One in eight home buyers is getting an exemption from controversial Central Bank mortgage rules, it has emerged.
First-time buyers with an exemption tend to borrow an average of €93,000 more than those who have to stick to the lending limits, research by economists in the Central Bank has found.
The lending limits have proved hugely controversial, with claims they are making it more difficult for people to buy a home.
Banks can issue up to 15pc of loans that exceed the deposit rules. They have discretion to decide who gets to be exempted, leading to claims that friends and relations of bankers are being favoured.
The average first-time buyer is coming up with a deposit of €61,000 to purchase a home, the research shows. This is up from an average of €56,000 before the lending limits kicked in.
The deposit averages 20pc of the property's value, which is seen as beyond the capacity of most ordinary workers.
The rules allow first-time buyers to have a deposit of 10pc for the first €220,000 borrowed, and 20pc for amounts over that.
Buyers are restricted to borrowing 3.5 times their income.
Some 17pc of lending exceeded the income cap out of a 20pc maximum that banks are allowed, the study found. The new research by Central Bank economists was released as the regulator said it had extended the deadline for submissions to its review of the mortgage lending restrictions.
Central Bank Governor Philip Lane has previously said the restrictions could loosen, but he also warned they could be tightened further.
The deadline is being extended to allow those thinking of making a submission to review the new research.
According to the new study, the average mortgage drawn down by first-time buyers under the new lending limits is close to €173,000.
The average property price is now almost €235,000. This means the average new buyer has a deposit of €62,000.
The income of the average buyer is just short of €65,000. Most new buyers are single.
The research looks at data from Bank of Ireland, AIB (which includes EBS), Permanent TSB, Ulster Bank and KBC Bank Ireland.
Before the lending limits came in the average first-time buyer was borrowing €174,000, for a property valued at €230,000.
The study found that 13pc of lending exceeded the rules on size of deposits. This works out at around one in eight mortgages.