Central Bank shuts down hopes of mortgage deposit rate cut

Hopes that a new government would see a relaxation of the Central Bank’s controversial mortgage lending limits have been dashed, as the bank has said they are “here to stay”.

Since the introduction of the 20% deposit requirement and stricter loan to earnings limits, the Central Bank has come under huge political pressure to relent, but the bank is now insisting the tough rules will remain.

As reported in the Irish Examiner on Saturday, a key demand from the Independent Alliance revolves around the issue of mortgages and debt.

Finance Minister Michael Noonan has led the political pressure on the bank, saying he thinks a deposit requirement of 10% would suffice, but the bank looks set to defy such pressure. While it says it is collecting data to review the policy later this year, “the rules are here to stay”.

“Any changes to the callibration of the rules will require a high evidence threshold,” said Cyril Roux, deputy governor for Financial Regulation at the bank. “While these rules have attracted much comment, including some spirited criticism, it remains the case that risky lending brought banks and many Irish borrowers into protracted financial difficulties.”

Mr Roux insisted the Central Bank introduced mortgage lending limits to protect borrowers by reducing the likelihood of them going into arrears and negative equity.

He also said they were introduced to help the banks become more resiliant to economic shocks and to prevent bank credit and house price spirals developing.

He said it is the duty of the bank to protecting customers and safeguarding the stability of the banking sector.

The new rules achieved the effect of cooling the market in Dublin on their introduction which had begun to overheat.

However, there have been loud criticisms from younger buyers, who say the rules effectively exclude them from getting on the property ladder.

Fianna Fáil’s finance spokesman, Michael McGrath, TD for Cork South Central, has called for rental income to be factored in to banks’ assessment of prospective mortgage customers, as a clear sign of means.

For its part, Fine Gael has proposed to cut the amount of Vat paid on new homes and introduce a ‘Help to Buy’ scheme as part of efforts to tackle the ongoing housing crisis.

A housing paper to be tabled by Fine Gael proposes a range of measures such as temporarily reducing Vat on new homes and apartments from 13.5% to 9%.


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