Opinions galore as Central Bank reviews mortgage lending

The Central Bank of Ireland's review of its macroprudential rules is sounding increasingly like an episode of the ITV game show Play Your Cards Right. All it needs is Bruce Forsyth shouting "higher" or "lower" to the various parties.

Introduced in February last year, the rules set the framework within which mortgage lenders must operate when considering applications for home loans.

So, first-time buyers must have a 10 per cent deposit in place for the first €220,000 of a house price and 20 per cent for the balance. Everyone else has to have a deposit of 20 per cent.

Banks can exempt up to 15 per cent of mortgages from these limits. A loan-to-income limit of 3.5 times was also put in place.

The rules are now being reviewed and various groups have pressed the regulator to loosen the deposit and income limits.

The Banking & Payments Federation Ireland wants the €220,000 ceiling to be lifted to €300,000 but is happy with the current income limit.

‘Affordability metric’

The Construction Industry Federation wants it increased to €330,000, while Property Industry Ireland has called for an increase to €400,000 in the greater Dublin area and €350,000 for the rest of the State.

It also wants the loan-to-income limit raised to 4.5 times from the current level, again to help buyers in the Dublin area.

In a letter to the Central Bank on Wednesday, Ulster Bank chief finance officer Paul Stanley called for the income limit to be replaced with an "affordability metric" that considers the term of the borrowing, existing debt levels and the customer's other commitments, including rental payments.

“The introduction of such a measure will most likely lead to changes in individual customer’s maximum borrowing levels within the regulator limits, but we believe it would encourage more informed and sustained lending practice,” Mr Stanley said.

The regulator will spend the coming weeks sifting through the 50 submissions it has received before giving its verdict in November. First-time buyers will be hoping for a Brucie bonus when the outcome is revealed but a minor tweaking of the rules might be as good as it gets.