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    Irish Central Bank Amends Mortgage Measures Framework

    October 19, 2022

    The Central Bank of Ireland published the conclusion of the mortgage measures framework review and announced a number of targeted changes to the mortgage measures, which will take effect from January 01, 2023.

    The Central Bank of Ireland conducted a comprehensive review of the mortgage measures framework, over the past 18 months through public surveys, a public consultation, listening forums, and a conference, with the aim to ensure that the mortgage measures in place remain fit for purpose into the future, as the economy and financial system evolve. The review showed that the existing measures have increased the resilience of borrowers, lenders, and the broader economy; the review also reaffirmed the benefits of such measures, as they help foster a more sustainable mortgage market. These measures act as system-wide guardrails and do not aim to replace lenders’ own prudent credit assessments, which remain central to the functioning of the mortgage market. To address the higher house-price-to-income ratios that have resulted from structural developments between demand and supply of housing, the Central Bank has announced the following targeted changes:

    • With regard to loan to income (LTI), first-time buyers can borrow up to 4 times of their gross income, which is an increase from 3.5 times, whereas second and subsequent buyers will continue to be able to borrow up to 3.5 times their gross income. The above change was introduced as first-time buyers have shown to be lower-risk in Ireland, and are generally at an earlier point in the income lifecycle and more likely to experience income growth during their mortgage.
    • The loan to value (LTV) for first-time buyers will remain at 90%, for second and subsequent buyers has increased from 80% to 90%, and for buy-to-let buyers will remain at 70%. Lenders will continue to be able to lend a certain amount above these limits, in line with their own credit policies. Lenders will have allowances to permit 15% of their lending above these limits in each of the first-time buyer and second and subsequent buyer markets.
    • Changes to the criteria required for a borrower to be considered a first-time buyer for mortgage measures are applicable for borrowers who are divorced or separated or have undergone bankruptcy or insolvency where they no longer have an interest in the previous property and who get a top-up loan or re-mortgage with an increase in the principal where the property remains their primary home.

     

    Related Link: Press Release on Mortgage Measures Framework

     

    Keywords: Europe, Ireland, Banking, Mortgage, Credit Risk, Lending, Loan to Income, Loan to Value Ratio, First Time Home Buyers, Residential Real Estate, Basel, Central Bank of Ireland

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