Central Bank leaves mortgage lending rules unchanged

Central Bank leaves mortgage lending rules unchanged

The Central Bank has decided not to make any changes to mortgage lending rules here that limit how much people can borrow from banks in order to fund house purchases.

Following a review, the regulator has concluded that the measures continue to meet their objectives of strengthening bank and borrower resilience.

It also said the measures reduce the likelihood and impact of a credit-house price spiral emerging.

Without the restrictions, the Central Bank estimates that Irish house prices would have been 26% in March – above Celtic Tiger levels – had the rules not been introduced.

“The mortgage measures are working and because they’re working, we don’t propose any changes to them,” new Central Bank governor Gabriel Makhlouf said.

“I want to be very clear that they are a permanent feature of the Irish market. The rules are not going away.”

While the bank did consider tweaking the caps, “we have not found a way that is more flexible than the exiting regime while at the same time meeting the objectives of the measures”, he added.

The measures were introduced in 2015 in order to strengthen the resilience of borrowers and lenders and to reduce the likelihood of an unsustainable credit fuelled housing boom.

The Central Bank claims the rules are not meant to target house prices.

The rules include a borrowing limit of three and half times gross income, while borrowers must have a particular level of deposit set aside dependent on whether they are buying a house for the first or second time or as an investment.

The decision not to change the restrictions is likely to come as a disappointment to some would-be-borrowers who had been hoping for some relaxation in order to enable them to borrow funds they require to make a purchase.

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