Central bank holds firm on mortgage lending rules despite criticism of ruining housing market
Stefan Gerlach — the No. 2 at the Central Bank — made clear there would be no going back to flirt with loose lending practises that led to the devastating Irish property bust and said the home-loan controls were here to stay.
Mr Gerlach said measures designed to safeguard the economy from another property crash — what the Central Bank calls its macro-prudential policy — cannot be expected to solve the deep-seated housing crisis rooted as it is in the lack of supply of new housing.
“The very limited evidence we have so far indicates that the measures are functioning as intended,” he told a Central Bank workshop. “Public discussion of the measures has highlighted a number of problems which exist in the Irish housing market, in particular in relation to supply constraints. Macro-prudential policy cannot solve these problems and they certainly cannot be resolved by risky lending: they can only be resolved by housing policy.”
The timing of the tough comments is significant. They come as both Mr Gerlach and his boss, governor Patrick Honohan, prepare to step down from the Central Bank in the next few weeks, after running the bank during the crisis years. His speech may mean that incoming Governor Philip Lane has less room to reshape the restrictions, even if he was of a mind to do so.
Meanwhile, rental prices across the country continue to rise — the average cost of renting a home is now €964 a month, an increase of 9.3% on last year.
