Builders’ plea on mortgage lending unlikely to move regulator

The construction industry is no fan of the Central Bank’s rules on mortgage lending, nor is it particularly happy with the drawn-out process behind the regulator’s review of their impact since they were introduced early last year.

The rules have made it more difficult for first-time buyers to get on the property ladder, particularly in Dublin, while the review has probably resulted in some potential purchasers sitting on their hands in the hope that Central Bank governor Philip Lane might ease up on them, allowing buyers to borrow bigger sums.

This might be wishful thinking given that the regulator has signalled wholesale changes are unlikely when the findings are published in November.

And it should be remembered that the rules are designed to protect the banks against a further crash, rather than penalising buyers. Issues relating to supply, which are being addressed only now by the Government in a meaningful way, also feed into the price of housing.

First-time buyers

In its submission to the Central Bank's review, the Construction Industry Federation (CIF), which lobbies on behalf of the sector, has gone "all-in" to use some poker terminology. It wants a 50 per cent increase to €330,000 in the ceiling at which first-time buyers need a deposit of only 10 per cent. This would likely capture the price of starter homes in Dublin.

And it wants the income limits loosened from 3.5 times currently to four or 4.5 times, again to make it easier for buyers in city areas to afford a home.

CIF director Hubert Fitzpatrick described these proposals as a "tweaking" of the rules but such radical change by the regulator seems unlikely. Especially given the negative media coverage in the past few days of AIB's and Bank of Ireland's respective performances in capital stress tests run by the European Banking Authority.

We might get an update on Lane’s thinking on this matter today, as he is due to speak about macrofinancial issues at an event hosted in Dublin by the Institute of International and European Affairs.