The Central Bank is to remove the €220,000 cap on mortgage lending for first-time buyers who have a deposit of 10%.
This is a shift from the current requirement, which puts the ceiling at 90% for loans up to €220,000 but at 80% for the rest of the mortgage above €220,000.
The Central Bank said this means that first time buyers will be able to borrow up to 90% of a value of a home, with borrowers needing a 10% minimum deposit.
However, the 20% minimum deposit requirement continues to apply to second and subsequent buyers.
After what it called an extensive consultation and evaluation process, the Central Bank also announced changes to the structure of the proportionate Loan-to-value allowances.
It said that 5% of the value of new lending to first time buyers will be allowed above the 90% LTV limit.
20% of the value of new lending to second and subsequent buyers for homes will be allowed above the 80% LTV limit.
This replaces the current requirement which allows 15% of total lending for homes above the LTV limits.
The Central Bank also said that the current two-month valuation period will be extended to four months. It said this was in recognition of the fact that a portion of house sales can take longer than the average three months to conclude.
All changes will be effective from 1 January 2017.
The Central Bank said its review of the mortgage rules affirms that the overall framework is appropriate.
It added that the measures are contributing to financial and economic stability, reducing the risk of unsustainable lending and borrowing.
“Over the past 18 months, the measures have helped to ensure that those who buy homes are better prepared to manage their mortgage payments in the event of a future downturn in the economy or in the housing market,” commented Central Bank Governor Philip Lane.
“While our review process affirmed the value of the overall framework, some modifications to the measures were suggested by our evidence-based analysis,” he added.
The mortgage measures had been introduced in February 2015 to enhance the resilience of both borrowers and the banking sector.
Earlier, Minister for Finance Michael Noonan confirmed he had been told by the Central Bank about any possible changes to its mortgage lending rules following a review.
He said he would leave it to the Governor, Philip Lane, to announce the results later at a press conference.
Asked whether he was happy with what he had heard from the Central Bank, the minister said he would “let the announcement speak for itself” but he was “not unhappy, certainly”.
Speaking later in the Dáil, Mr Noonan said he hopes the Central Bank’s modifications to the prudential rules will help people get deposits together for homes.