The Central Bank has announced new regulations on residential mortgage lending.
The new regulations offer some positive news for buyers, with the required deposit to 10 per cent for first time buyer while a 20 per cent deposit is now required for all others.
First time buyers will now be able to borrow 90 per cent of the value of a property but only up to €220,000, after which the remaining figure will require a 20 per cent deposit.
In addition to this, mortgages are limited to 3.5 times the buyer’s gross income. The cumulative effect of these regulations mean a first time buyer looking to buy a property for €350,000 will need to save €48,000 and earn a gross income of €86,000 to borrow the remainder.
Buy-to-let purchases will now require a thirty per cent deposit for all mortgages.
The Central Bank said today that the “key objective of these regulations is to increase the resilience of the banking and household sectors to the property market and to reduce the risk of bank credit and house price spirals from developing in the future.
“It is expected that the regulation will be introduced under legislation in the coming weeks.”
The announcement comes after the International Monetary Fund gave its support to the Central Bank rules on mortgage lending earlier today.
Governor of the Central Bank Patrick Honohan said: “These measures will reduce potential financial vulnerabilities for both borrowers and the wider economy and will help ensure a stable and well-functioning mortgage lending market.”
“We have carefully considered all feedback received through the consultation process. As far as the LTV limits are concerned, we are retaining the basic 80 per cent LTV limit for owner-occupier loans and 70 per cent for buy-to-lets with the proportionate allowances already announced.
“At the cost of some additional complexity, but without compromising the overall effectiveness of the measures, we are increasing the limit for first-time buyers of lower-cost houses,” he added.
Deputy Governor of the Central Bank, Stefan Gerlach, said: “In Ireland we are still experiencing the destabilising effects of a property bubble. We have based these regulations on in-depth economic analysis and empirical evidence. Measures such as these should be a standard part of a well regulated financial system.”
