Irish Brokers Association: Change lending rules

The Irish Brokers Association has reiterated its call for a loosening of mortgage loan restrictions, as the Central Bank published research on the way the rules are affecting the mortgage market since they were first introduced in early 2015.

The Central Bank said its research could help inform the public and industry organisations as it prepares a formal review of the loan rules later this year.

The research found that the average loan advanced to first-time buyers under the new rules was €172,872, at an average property price of €234,599.

The average income of first-time buyers qualifying for mortgages under the rules was €64,721, with a loan-to-value of 78.7% and an average loan of 2.8 times income.

The average household income for second and subsequent buyers qualifying for mortgages under the rules was €104,331. The second-time buyer on average borrowed €203,539 on a property worth €374,644.

The research also showed how few mortgage loans were advanced in 2015. Between early February, when the rules first applied, and the end of December 2015, only 25,513 home and buy-to-let loans to a value of €4.59bn were advanced under the rules.

A further 10,983 mortgage loans to a value of €2bn were advanced outside the scope of the rules.

Michael Dowling, chair of the mortgage committee at the Irish Brokers’ Association, said the mortgage loan restrictions were “very detrimental” to the market, as shown by the small number of qualifying loans despite an improving economy.

The restrictions dissuaded people from applying for mortgages. Many struggled to save for a 20% deposit, he said. The IBA wants the Central Bank to raise its loan-to-income rule substantially, and for the loan-to-value ratio to be hiked to 85% from 80% for second-time buyers.

The Central Bank research showed that 13% of home-loan lending exceeded the loan-to-value and loan-to-income rules in 2015. Banks are given discretion to exceed the ratios, to certain limits.

Separately, the Central Bank said business lending to SMEs rose by 4.8% in the first quarter this year. The survey, which excludes lending to small financial and property firms, also found that rejection rates of loan applications here were now close to the rest of the eurozone.

However, the overall outstanding amount of loans to SMEs has fallen again, as existing loans get paid down.


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