Central Bank to make limited changes to mortgage loan rules

No major overhaul is expected, despite the ongoing inflation crisis

Borrowers and lenders alike are subject to mortgage loan rules drawn down by the Central Bank.  Picture: iStock

Central Bank governor Gabriel Makhlouf is set to announce limited changes to its mortgage loan rules, but no major overhaul is expected despite the inflation crisis.

The mortgage rules were first introduced in early 2015 to ensure no repeat of the credit bubble that led to runaway prices and the disastrous collapse in Irish home prices from the onset of the 2008 banking bust.

The rules limit the amounts first-time and other borrowers can raise on their mortgages based on their household income, and the value of the property they are seeking to buy. Mortgage lenders also face restrictions on the amounts they can lend out. 

The Central Bank conducts an annual review of the rules, but the results of what it calls a framework review will be announced on Wednesday. 

It follows consultations with lenders, mortgage brokers, and consumer advocates. 

Under the current rules, first-time buyers are allowed to borrow up to 3.5 times their household income, and are usually required to provide a deposit of 10% of the value of the property. Second-time borrowers are required to provide a deposit of 20%.    

The framework review will also consider Government schemes to help first-time borrowers, including the Help-to-Buy scheme, which has long been criticised by many economists for helping to add to price inflation for new homes during a time of acute shortages.

Trevor Grant, Chairperson of the Association of Irish Mortgage Advisors said the current rules have largely served the market well since their introduction in 2015.

"Unfortunately though we still have a chronic under-supply of property to cater for demand and in a market where there is also a similar undersupply of rental properties, this is unacceptable from a consumer and society perspective."

"Therefore there is a concern that by increasing the multiple at this time it may increase prices until sufficient property supply is delivered."