Tuesday 17 September 2019

Central Bank confirm no change to mortgage rules

(Stock photo)
(Stock photo)
Charlie Weston

Charlie Weston

THE rules dictating the amount of money people can borrow for a home and the size of deposits needed are to remain unchanged, the Central Bank said after a review.

The rules set out how much customers can borrow for a home loan, and are in place to stop banks over-lending and consumers over-borrowing.

A statement from the regulator said the rules are achieving financial stability and are protecting consumers.

Introduced in 2015, the rules have been credited with slowing down the pace of house price growth.

The analysis by the Central Bank found that house price inflation should continue to ease due to increases in house building and more sales of existing properties.

Central Bank governor Philip Lane said: “Our review shows that, while the pace of growth in the new mortgage lending is strong, there has been little change in average LTVs (loan to value) and LTIs (loan to income) and no sign of a generalised deterioration in lending standards. On the basis of these findings, no change is required to the current framework.”

He acknowledged that the high level of house prices and rents were posing serious affordability issues, but more house building was the answer.

“A fully functioning and sustainable housing market is not achieved by tolerating imprudent lending standards by banks or excessive borrowing by households,” he said.

The Central Bank introduced the mortgage lending restrictions for homebuyers in 2015 in order to avoid a repeat of the property crash.

They limit most customers to borrowing no more than three-and-a-half time their income.

Some exceptions are allowed, with 20pc of the value of new mortgages issued by each bank to those purchasing for the first time permitted above that limit.

But in the case of second time buyers, only 10pc can go over that threshold.

There are also restrictions on the proportion of loans that can breach specified loan-to-value ratios.

First-time buyers also need a deposit of at least 10pc, with 20pc required for other buyers.

Again some exemptions are allowed.

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