Central Bank: Mortgage caps to stay

The Central Bank expects to make permanent controversial loan-to-value and loan-to-income limits on mortgage lending introduced last year, though the levels may be calibrated, its deputy governor said yesterday.

Politicians from across the political spectrum have criticised the limits, which aim to avoid a repeat of the 2008 property crash, saying the required 20% deposit puts house ownership beyond the means of many.

The Central Bank is due to review the rules in November, but deputy governor Sharon Donnery said in an interview with the Sunday Independent that it was not considering removing the limits.

“Our expectation at this stage is that the caps will be a permanent feature and what we will analyse will be the calibration,” she said, according to a transcript of the interview published by the bank.

“Our intention is that some form of cap around LTV (loan-to-value) and LTI (loan-to-income) would become a permanent feature.”

If signs emerge that the property market is overheating, the measures could be tightened further, she said.

Last week, the Central Bank launched a public consultation process — on how the new mortgage rules have affected the market — ahead of its November review. Ms Donnery, then, said that while individuals’ ability to access credit and buy houses has been affected, the limits are designed to protect the system as a whole and should be seen in a medium-to-long-term view.

This weekend’s interview with Ms Donnery also said that the Central Bank unsuccessfully sought permission, from the Department of Finance five years ago, for it to be able to regulate vulture funds and special purpose vehicles for fear of hedge funds and private equity houses buying discounted mortgage books and treating borrowers unfairly.

Submissions to the Central Bank’s mortgage consultation process, or ‘call for evidence’, can be made up until August 10.

* Reuters (additional reporting Irish Examiner).