New Research Analyses Mortgage Market Data and Allowances

• €2.3 billion of mortgage loans in first half of 2016
• The average LTV and LTI in the first half of 2016 were broadly similar to 2015 for in-scope First Time Buyers and Second and Subsequent Buyers
• Characteristics of borrowers with allowance to exceed LTV or LTI cap similar to 2015

The Central Bank has published a new Economic Letter (PDF 1.76MB) by Christina Kinghan, Paul Lyons, Yvonne McCarthy and Conor O’Toole providing an overview of residential mortgage lending that took place in Ireland in the first half of 2016.

In its role as the macroprudential authority of Ireland, the Bank introduced mortgage regulations in 2015 to protect households against over-indebtedness and safeguard the stability of the banking system.

The regulations apply loan-to-value (LTV) and loan-to-income (LTI) limits to mortgage lending, while allowing for a certain percentage of lending in excess of the limits. The Letter uses loan-by-loan information collected by the Central Bank to monitor compliance with the LTV and LTI limits. The data in the Letter are compiled from lenders who advanced at least €50 million of residential loans in the first six months of 2016, and includes Allied Irish Bank, Bank of Ireland, Permanent TSB, Ulster Bank Ireland and KBC Bank Ireland.

The Letter examines mortgage lending covered by the regulations (in-scope) and lending which was exempted from the regulations (out-of-scope).   The average LTV and LTI for both First Time Buyers and Second and Subsequent Buyers were in line with figures for 2015.  

Under the measures, a proportion of lending is permitted at levels of LTV and LTI above the specified limits.  This recognises that higher LTV and LTI mortgages can be appropriate in certain circumstances. The data shows that a total of 11 per cent of the value of new Principal Dwelling House lending at the five institutions exceeded the LTV cap (up to 15 per cent per institution is permitted over the entire year), with 12 per cent exceeding the LTI cap (up to 20 per cent per institution is permitted over the entire year).  

The average loan drawn down by First Time Buyers in scope of the regulations was €180,011, with an average property price of €244,320 and average income of €65,944. 

For Second and Subsequent Buyers the average loan drawn down and in scope of the regulations was €211,662, with an average property price of €380,752 and an average income of €105,473. 

The views expressed in this paper are those of the authors only and do not necessarily reflect the views of the Central Bank of Ireland.

Notes:

Data underlying any charts in this publication is available on request from [email protected]

Information on the mortgage regulations can be found here.