Central Bank Leaves Mortgage Lending Rules Largely Unchanged

The Central Bank has retained mortgage lending restrictions but has made a slight adjustment to the level of exemptions on those limits.

The change will see most buyers restricted to borrowing no more than three-and-a-half times their income while first-time buyers will still be required to have a deposit of 10% of the property’s value, with a 20% deposit needed by second and subsequent buyers.

Until now banks could allow 20% of all borrowers an exemption from the income limits – this exemption did not distinguish between new and second-time buyers. Instead they allowed the likes of a newly qualified doctor to avoid the income limit, as their income is expected to rise, however the regulator has now said that banks will only be allowed to exempt 10% of second-time buyers from the income-limit rules.

Nonetheless banks will be able to exempt up to 20% of first-time buyers from the rules, if they qualify for an exemption.

Central Bank governor Philip Lane said ”The larger allowance for above-ceiling lending to first-time buyers compared to second and subsequent buyers reflects the different characteristics of these two groups.” ”In particular, first-time buyers are typically younger, with current income levels lower relative to expected future income levels’.”

He added that the lending limits remain sufficiently flexible to allow the Central Bank to respond to risky lending developments, should they arise in either buyer group.

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