Central Bank scraps 20% deposit rule for first-time buyers

Central Bank scraps 20% deposit rule for first-time buyers

The Central Bank has announced a major change to its mortgage deposit rules for first-time buyers.

It has confirmed that the rule requiring first-time buyers to have a deposit of 20%, on properties above a certain value, will be scrapped.

It means that a first-time buyer will now only require a deposit worth 10% of the entire value of a property, regardless of its price.

However the 20% deposit rule will continue to apply to second-time and subsequent buyers.

The Central Bank is also relaxing the rules which limit the amount that first-time buyers can borrow, relative to their income.

Five per cent of the value of new lending to first time buyers will be allowed above the 90% loan to value (LTV) limit and 20% of the value of new lending to second and subsequent buyers for primary residences will be allowed above the 80% LTV limit.

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% loan to value ratio limit for all first time buyers simplifies the overall framework, with only 5% of lending permitted above this level.

"The 20% allowance for lending above the 80% 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 changes cast doubt over Michael Noonan's plans for a help-to-buy scheme, which were intended to help first-time buyers overcome the onerous rules on deposits.

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