One in five people taking out mortgages are getting a pass from Central Bank lending restrictions.
And new research by the Central Bank reveals most people for whom income limits have been waived are borrowing as much as they can.
In 2015 the Central Bank imposed strict rules on mortgage lending to reduce the risk of another banking crash triggered by subprime loans.
But there are exceptions to these rules, and new research published today by the regulator looks at these in detail.
It has found one in five people who took out mortgages got one of these waivers.
It also says the majority of borrowers using the waivers have taken out as much as they allowed to.
And banks have been maximising the number of customers who can get a waiver by letting them borrow more than three and a half times their income OR giving them a pass on saving for a deposit.
When the scheme started in 2015, just a third borrowed more than four times their income -- but this figure is now up to 47 per cent.
The authors say the rules are still doing their job but warn the waivers demand constant vigilance.
Brokers Ireland said the exemptions provide a “lifeline” for many aspiring home owners.
Diarmuid Kelly, Chief Executive of the organisation, said it’s hardly surprising that half of first-time buyers with a loan-to-income exemption are borrowing at the maximum available term and loan-to-value.
“While no one wants to see FTBs, or anyone else for that matter, borrowing beyond what is affordable, the fact of the matter is, it makes sound economic sense to attempt to buy a home, not only because it is better value in the short-term but it is also very likely to increase one’s personal wealth over the longer term, as various studies have shown,” he said.
He said there are also other factors to be taken into account.
“Typically the incomes of FTBs improve over time as they progress in their careers and it is not as if the loans being advanced under the exemptions are being issued without borrowers first being subject to strict repayment capacity tests.
“One of the main factors that led to the financial crash was banks dispensed with this traditional discipline of affordability testing, which has now been restored.”