Central Bank chief hails mortgage lending rules as regulator continues review

Rules had worked to protect banks and borrowers, regulator said

Sharon Donnery, the Central Bank's deputy governor, said the mortgage rules, which restrict the amounts that home borrowers can borrow and the amounts mortgage banks can lend to customers, have worked well.

Sharon Donnery, the Central Bank's deputy governor, has hailed the success of the regulator's mortgage rules that will bolster expectations there will be little change in policy when a major review comes to an end this year.

In a speech to the regulator's own conference that features banking experts, Ms Donnery said the mortgage rules, which restrict the amounts that home borrowers can borrow and the amounts mortgage banks can lend to customers, have worked well. 

For borrowers, the rules set loan-to-income and loan-to-value limits.         

The rules, which were brought in at the end of 2014 following the devastating collapse of the Irish property market over 10 years ago, were designed to prevent the property lending bubble ever happening again and to ensure Ireland's lenders would never again put themselves and the whole economy at risk by lending out vast sums.  

Since their introduction, the mortgage rules have been subject to annual reviews and the Central Bank last year launched a major canvassing of the views of the public and the mortgage industry. 

Its latest initiative involves it organising a conference of international experts ahead of completing its review of the rules. 

Speaking at the conference, Ms Donnery said the rules came in "at a time when the banking system was only beginning to emerge from the catastrophic damage caused by the 2008 financial crisis". 

"This crisis had an unsustainable real estate lending boom at its heart. House prices had been recovering from their trough in 2013, but the affordability challenges that have caused such difficulties for so many households were only beginning to emerge," she said. 

The rules had worked to protect banks and borrowers, the regulator said.  

"Our assessment up to now is that the measures have been successful against both of these stated aims. Our data tell us that lending over recent years has been happening at much lower loan-to-income ratios than at a broadly similar point in the pre-2008 cycle," Ms Donnery said. 

Many mortgage brokers believe the Central Bank will have no appetite to change the rules on income ratios, in particular, with house prices continuing to climb and supply shortages persisting.