Central Bank economist signals no change on mortgage lending rules

A heavyweight at the Central Bank has again signalled there will be no turning back on its strict mortgage lending rules, as figures yesterday showed the number of home loans advanced by banks fell last month.

Chief economist Gabriel Fagan said that memories of the enormous costs and pain involved in the property and banking crash can soon fade.

This should “impose an obligation both on property market participants and policymakers to act in ways which avoid a repetition of such deleterious outcomes”, he said.

Mortgage brokers and others have recently stepped up criticism of mortgage rules which have imposed lending restrictions on the amounts home buyers can borrow, and set limits on the amounts of mortgage loans that banks can advance.

The new figures published by the Banking and Payments Federation Ireland suggest the Central Bank’s rules are biting hard.

It said a monthly total of 2,531 mortgages were approved over the three months to the end of October, the bulk of which were used to buy homes.

The number of mortgages approved fell by 2% in the year, and were down 5.7% in the month.

Mr Fagan, speaking at a property conference, said the risk of any future property crash bringing down banks, as had happened here during the crisis, had diminished.

“The risks could be reduced still further by changes” in both commercial and residential markets,” he said.

Dermot O’Leary, chief economist at Goodbody Stockbrokers, said mortgage lending forecasts of €4.5bn this year and €4.9bn in 2016 compare with a “normal mortgage market of €8bn in Ireland”.