Outcome of Review of Mortgage Measures announced

• Review confirms that the overall framework is appropriate and the measures have contributed to financial and economic stability.
• Review based on extensive analytical work and public consultation.
• Refinements to improve the effectiveness and sustainability of the measures.

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The Central Bank of Ireland today (23 November) announced the outcome of the review of the mortgage measures, following an extensive consultation and evaluation process. The mortgage measures were introduced in February 2015 to enhance the resilience of both borrowers and the banking sector.

The review affirms that the overall framework is appropriate and the measures are contributing to financial and economic stability, reducing the risk of unsustainable lending and borrowing.

Following the review, the framework is broadly unchanged. The 3.5 times ceiling on the loan to income (LTI) ratio remains. Requirements for buy to let borrowers and the exemptions for negative equity mortgage borrowers from the measures also remain unchanged.

The review identified a number of refinements to improve the sustainability and effectiveness of the current framework.

The refinements are:

• The ceiling on the loan to value (LTV) ratio for all first time buyers will be set at 90 per cent. This is a shift from the current requirement, which puts the ceiling at 90 per cent for loans up to €220,000 but at 80 per cent for the balance of loans above €220,000. This means that first time buyers will be able to borrow up to 90 per cent of a value of a home, with a requirement for a 10 per cent minimum deposit.
• The 20 per cent minimum deposit requirement (i.e. maximum LTV ratio of 80 per cent) continues to apply to second and subsequent buyers.
• The structure of the proportionate LTV allowances is amended. Five per cent of the value of new lending to first time buyers will be allowed above the 90 per cent LTV limit and 20 per cent of the value of new lending to second and subsequent buyers for primary residences will be allowed above the 80 per cent LTV limit.  This replaces the current requirement which allows 15 per cent of total lending for primary dwellings (the sum of lending to first time buyers and second and subsequent buyers) above the LTV limits.
• The current two-month valuation period will be extended to four months 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.

Governor Philip Lane said: ‘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. While our review process affirmed the value of the overall framework, some modifications to the measures were suggested by our evidence-based analysis.’

‘The 3.5 times ceiling on the loan to income ratio remains unchanged. The 90 per cent loan to value ratio limit for all first time buyers simplifies the overall framework, with only 5 per cent of lending permitted above this level. The 20 per cent allowance for lending above the 80 per cent loan to value ceiling for second and subsequent buyers is broadly in line with current lending patterns.   The loan to value requirements for all other buyers will remain in place. Taken together, these measures constitute a sustainable framework to underpin our financial stability objectives.’

The Central Bank has also published a report on the review process and a feedback document which responds to the submissions made during the consultation process.  All submissions made in the consultation process will be published on the Central Bank website.

A series of economic papers and additional research undertaken by the Central Bank during the course of the consultation has also been published and can be seen here.