The new Central Bank rules on mortgage lending will be introduced immediately once they are agreed next week.
There has been speculation that a new loan-to-value cap would be phased in over time, but it is believed the Central Bank will look to introduce the new rules once they are unveiled on Thursday.
According to people familiar with the situation, the Central Bank governor, Patrick Honohan, in particular, is insisting the new rules are implemented once agreed as he believes any staged introduction would distort the market.
The 10-member Central Bank Commission meets next Tuesday to consider up to four different proposals on new macro-prudential tools aimed at preventing another housing bubble.
Last October, the Central Bank proposed that banks would be restricted to 80% loan-to-value mortgages for 85% of lending each year.
Moreover, the maximum loan permitted would be three-and-a-half times’ annual income for 80% of yearly mortgage lending.
There were 147 submissions made to the Central Bank on the proposed rules from stakeholders with the vast majority raising concerns about the loan-to-value proposal. There was also high level political opposition from the Tánaiste Joan Burton and other cabinet ministers as well as the Department of Finance.
There was no opposition to the loan-to-income and the 60% loan-to-value cap for buy-to-let property proposals and these are expected to be ratified without amendments.
However, there is likely to be a modification to the 20% deposit rule, although it is believed that a final decision will not be made until next Tuesday.
As has been reported a lower deposit for first-time buyers will be considered. It is believed mortgage insurance will also be considered as it would lead to a lower deposit requirement.
The backlash against a 20% deposit has focused on the impact it would have on first-time buyers and the likely exclusion of low and middle-income earners from the housing market.
However, Mr Honohan and Central Bank deputy governors Cyril Roux and Stefan Gerlach are said to be adamant that new loan-to-value macro-prudential tools will be introduced.
In the past one of the criticisms of the Central Bank is that it lacked independence and rarely challenged the Department of Finance on policy proposals.
© Irish Examiner Ltd. All rights reserved