New mortgage rules provide some relief for first-time buyers

New regulations on mortgage lending have been announced by the Central Bank, providing some relief for first-time buyers.

The rules, which are aimed at preventing another property bubble, were discussed at the Central Bank Commission’s monthly meeting yesterday.

First-time buyers will now be able to borrow 90% of their property’s cost, up to a limit of €220,000. They will have to provide a further 20% deposit on any amount exceeding this.

In other cases, however, banks will only be able to lend up to 80% of the value of a property — all other owner-occupier borrowers will need to provide a deposit of 20%, while buy-to-let borrowers will have to come up with 30% of the property value. The IMF has approved the cap and said the limits would increase the resilience of households and banks against any future financial shocks.

Finance Minister Michael Noonan said the plan will “provide certainty to borrowers” and ensure the banks “continue to engage in prudent lending practices”.

Central Bank governor Patrick Honohan said the plan follows an extensive consultation process. “These measures will reduce potential financial vulnerabilities for both borrowers and the wider economy and will help ensure a stable and well-functioning mortgage lending market,” he said.

“Although they have been designed to be stable, the requirements are flexible enough to be adjusted in the future, should the need arise, without the need for a long period of consultation.”

Fianna Fáil finance spokesman Michael McGrath hit out at the move, saying thousands of non-first-time buyers could be trapped by the 20% deposit rule. “This could result in an entire generation of people being trapped in houses and apartments which are no longer suitable for their needs,” said Mr McGrath.

The Institute of Professional Auctioneers and Valuers has also expressed concern, saying the move could confine many to renting for long periods, resulting in a rise in rental costs.

The regulations are expected to be introduced under legislation in the coming weeks and will have immediate effect once approved by the Oireachtas.