Early approval can beat new mortgage rules

Central Bank indicates that usual six-month term of approval still applies

First-time buyers can beat the Central Bank clampdown on mortgages by getting approval now.

While the Central Bank has indicated that it hopes to bring in its new tighter lending rules from January 2015, and has urged lenders “to adapt their lending practices . . . in anticipation of its introduction”, those who enter into an agreement with their bank ahead of this deadline may be able to borrow under existing mortgage terms.

"I would be saying 'get approved now'," says Trevor Grant, chairman at Association of Expert Mortgage Advisers and managing director of Let's Talk Finance, noting that, if a first-time buyer were to secure mortgage approval today, this could see them effect a sale up to mid-April of next year under the old rules.


As the Central Bank’s consultation document on residential mortgage lending, which it published on October 7th, states: “If a regulated financial service provider has entered into a mortgage offer (sanction in principle) commitment before the date on which the LTV/LTI [loan to value and loan to income] limits come into effect, the limits do not apply to that commitment.”


According to the Banking and Payments Federation, this is likely to cover mortgage approval in principle, which allows home buyers to get mortgage approval before finding their home. Approvals normally last for up to six months, and may be renewed.

Getting such approval now would enable first-time buyers to purchase a property over the next six months with a deposit of about 10 per cent, and an income multiple of about 4.5 times salary.

Depending on how the Central Bank’s consultation process proceeds, first-time buyers may need a deposit of twice that come January, and may only be able to borrow up to 3.5 times their salary.

"The sensible thing, if you're thinking of buying next year, is, get some kind of approval now," suggests Karl Deeter of Irish Mortgage Brokers.

Some buyers are acting ahead of the clampdown."Our offices are being bombarded with first-time buyers. We've seen a massive uplift," says Keith Lowe, managing director of Douglas Newman Good.

Fiona Reddan

Fiona Reddan

Fiona Reddan is a writer specialising in personal finance and is the Home & Design Editor of The Irish Times