IMF: No need to change Ireland's mortgage rules

The IMF has credited the Central Bank’s mortgage lending rules with steadying house prices here, saying there is no need to change them.

The rules, which were introduced a year ago, have come under fire from mortgage brokers, and other home-selling groups.

They have claimed that the rules are too restrictive.

Many market analysts, however, have said that the so-called maco-prudential measures have prevented another disastrous overheating of the Irish property market, at a time when the paltry supply of new homes is failing to meet the demand.

The Economic and Social Research Institute, earlier this week, said that it would like the rules to be more transparent and flexible, so as to take account of housing supply.

The Central Bank has signalled that it may tweak the rules, when it starts to review its macro-prudential policies, which are designed to protect the financial system, later this year.

In its report on the health of Ireland’s financial system, the IMF yesterday appeared to support the Central Bank’s view, saying that “more information is needed before trying to refine their calibration”.

The report said that threats to the recovery and to Irish banks, more than likely, would now be from overseas. The slowdown in world growth “must be of concern”, because of the open nature of the Irish economy.

“In particular, the tight linkages with the UK financial system warrant the ongoing attention of the authorities,” the IMF said.

It said the balance sheets of Irish banks shrank during the crisis, but the rapid growth of the foreign-owned funds management firms based here, including debt-driven hedge and bond funds, “should continue to be monitored”.

It also identified the rise in commercial property prices as a risk to financial stability.