The Central Bank of Ireland today (27 January) announced the
introduction of new regulations which will apply proportionate limits to
mortgage lending by regulated financial services providers in the Irish market.
The key objective of these regulations is to increase the resilience of the
banking and household sectors to the property market and to reduce the risk of
bank credit and house price spirals from developing in the future. It is
expected that the regulation will be introduced under legislation in the coming
weeks.
The measures introduce proportionate limits for loan to value and loan
to income measurements for both primary dwelling houses and buy to let
mortgages. The limits are supplementary to individual banks' credit policies
and are not designed as a substitute for lenders’ responsibilities to assess
affordability and lend prudently on a case-by-case basis.
Loan to Value (LTV) for principal dwelling
houses (PDH)
There are different limits for different categories of buyers:
·
PDH mortgages for non-first time buyers are subject to a limit of 80 per
cent LTV.
·
For first time buyers of properties valued up to €220,000, a maximum LTV
of 90 per cent will apply. For first time buyers of properties over €220,000 a
90 per cent limit will apply on the first €220,000 value of a property and an
80 per cent limit will apply on any excess value over this amount.
·
The cumulative monetary value of loans for principal dwelling purposes
which breach either of these limits should not exceed 15 per cent of the euro
value of all PDH loans on an annual basis.
Housing loans for borrowers in negative equity who wish to obtain a
mortgage for a new property are not within the scope of the LTV limits.
Loan to Value (LTV) for Buy to Let mortgages
(BTLs)
·
BTL mortgages are subject to a limit of 70 per cent LTV.
·
This limit can only be exceeded by no more than 10 per cent of the euro
value of all housing loans for non PDH purposes during an annual period.
Loan to Income (LTI) for PDH mortgages
·
PDH mortgage loans are subject to a limit of 3.5 times loan to gross
income.
·
This limit should not be exceeded by more than 20 per cent of the euro
value of all housing loans for PDH purposes during an annual period.
Switcher mortgages and housing loans for the restructuring of mortgages
in arrears or pre-arrears are not in the scope of the Regulations.
