Alison Fearon from Switcheroo.ie on the Central Bank of Ireland’s Mortgage Measures Public Survey
It’s not often that you get a chance to influence macro-prudential policy in Ireland but that is what the Central Bank of Ireland is asking of you. What is macro-prudential policy I hear you ask?
The Central Bank of Ireland has a mandate to help manage the stability of the economy. A big part of this is the housing and associated mortgage market. The mortgage boom and bust in Ireland a decade ago is clear evidence of when Macro prudential policy is left wanting.
In the wake of the financial crisis, the Central Bank established a new Mortgage Measures Framework which put rules in place on how mortgage providers can lend to customers. These measures focussed on Loan to Income (LTI) and Loan to Value (LTV).
LTI: There is a general limit of 3.5 times gross annual income for all new mortgage lending for principal dwelling homes, with some scope for flexibility. This limit does not apply to customers looking to switch provider.
LTV: There are different limits for different categories of buyer. For first-time buyers, the limit of 90% LTV applies on the full value of all residential property, so first-time buyers will need a deposit of 10% for any house or apartment. For non-first-time homebuyers, there is a limit of 80% of LTV on new mortgage lending, whatever the price of the property, so they will need a deposit of 20% of the total purchase price.
Many first-time buyers will feel they are unable to borrow enough to get on the ladder, but we have sadly seen the impact of credit fuelled house prices. Perhaps a more nuanced affordability measure should be considered which looks at beyond income but at expenditure. All the banks have versions of this already as a second layer of affordability assessment, but they are all slightly different which means different banks will lend different amounts to the same customer despite the current Mortgage Measures Framework.
The Central Bank of Ireland are currently making a full review of the Mortgage Measures Framework which will run into 2022 and currently have an open survey which they are looking for YOUR view on the measures. You can find the survey here but it finishes at the end of this month so if you want your say, now is the time to speak. The results being published later in the year.
If you are considering a mortgage and are looking for advice on what you can afford and what provider will lend you what amount, register @ Switcheroo.ie and talk to an advisor who will guide you through this process. Remember different lenders will often lend different amounts to the same individual which is why it is worth talking to us @Switcheroo.ie
Alison Fearon is Managing Director of Switcheroo.ie
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