First-time buyer deposits cut to 10% as Central Bank eases mortgage rules

First-time buyers will only be required to have a deposit of 10 per cent regardless of the value of a property when applying for a mortgage, as a result of a decision by the Central Bank to relax its macroprudential rules. This is a shift from the current requirement, which puts the ceiling at 90 per cent for loans up to €220,000 but at 80 per cent for the balance of loans above that level.

This means that first-time buyers will be able to borrow up to 90 per cent of a value of a home. The 20 per cent minimum deposit requirement (ie maximum loan-to-value ratio of 80 per cent) continues to apply to second and subsequent buyers. The 3.5 times ceiling on the loan-to-income ratio remains unchanged. Requirements for buy-to-let borrowers and the exemptions for negative equity mortgage borrowers from the measures also remain unchanged.

Speaking to reporters at a press conference announcing the changes, Central Bank governor Philip Lane warned the rules “can be tightened if there is emerging evidence of elevated risks in the mortgage market”.

“The measures are designed to ensure lower resilience, but they are also designed to ensure banks lend sensibly and that excess credit does not build up within the Irish financial system,” he said.

“The evidence shows that the probability of default for mistakes brought out under the measures [brought in last year] is lower.”

Mr Lane also said the change to the €220,000 threshold was partly due to the fact that it would otherwise need regular updating as house prices, incomes and other factors evolve.

By Ciaran Hancook & Joe Brennan, Irish Times, 23 November 2016