In 2015, the Central Bank of Ireland introduced the mortgage measures as a permanent feature of the mortgage market. The purpose of the measures is to increase the resilience of borrowers and the banking system so that they can better withstand any future economic shocks. The measures are not intended to regulate or directly control the level of house prices but are focused on the interaction between changes in mortgage lending and house prices over time. Accordingly, the measures are designed to ensure that banks and other lenders lend money sensibly, avoiding a situation where the banking system lends too much and house buyers borrow more than they can afford. This is central to the Central Bank’s policy framework and a key element of our mandate to safeguard financial stability and protect consumers.

The measures are reviewed annually. This is to ensure that they continue to meet the objectives of increasing bank and borrower resilience. 

Reviewing the measures annually allows the Central Bank to respond to emerging joint risks in the credit and housing markets and to adjust the measures accordingly to promote the long-term sustainability of Irish mortgage lending and safeguard wider financial stability.

No. While the measures place ceilings on the size of mortgages, they do not replace responsible lending standards and the application of suitability requirements by lenders. Lenders must continue to be satisfied that mortgages are affordable for borrowers for the duration of the life of a loan.

The Review considered whether the measures continue to work as intended, given the current conditions and outlook for the housing and credit markets. Along with this, the Review   considered any practical implementation issues indicated by the Central Bank’s ongoing monitoring and supervision of regulated mortgage providers. The Review was also based on analysis of mortgage lending and housing market data and the Central Bank’s own research. For more information on how the Central Bank conducted the Review read the full 2017 Review.

The Review confirmed that the measures continue to operate as intended. The core elements of the measures, the loan to income (LTI) and loan to value (LTV) limits, will remain unchanged in 2018.

However, the Review highlighted that the framework of the mortgage measures would be improved by introducing separate allowances for lending above the 3.5 times LTI limit to first-time buyers (FTBs) and second and subsequent buyers (SSBs). The changes are similar to those introduced for loan to value allowances last year.

From 1 January 2018 the amount of new lending allowable in a given year above the 3.5 LTI limit for primary dwelling home (PDH) mortgages will now be considered separately for FTBs and SSBs. Specifically:

• 20% of the value of new lending to FTBs will be allowed above the limit.
• 10% of the value of new lending to SSBs will be allowed above the limit.

In addition, one technical adjustment on the calculation of property values in certain cases is being implemented arising from the Review. This adjustment prescribes how lenders calculate the value of the collateral in the case of all mortgages issued for purchasing land with the intention to construct a building, or issued to fund the construction of a building.

The adjustment is:

At the time of entering a loan agreement, when calculating the value of the collateral lenders will be required to take the lower of

• The estimated market value of the property after completion of all works, or
• The sum of the site cost plus the cost of works, as estimated at the time of entering into the loan agreement

Allowances to exceed the loan to income limit have been central to the framework of the mortgage measures since their introduction. The allowances acknowledge that higher LTI mortgages can be appropriate in certain circumstances.  For example, such allowances might be appropriate for younger borrowers who are at an early stage in their income lifecycle, or for borrowers who take out a larger loan in order to purchase a better located property, which can reduce transport costs and improve overall sustainability.

Following the first Review of the mortgage measures in 2016, separate LTV allowances were introduced for FTBs and SSBs.  However, the LTI allowance remained pooled across the two groups. In the analysis conducted as part of the 2017 Review, a number of advantages of separate LTI allowances for FTBs and SSBs were highlighted. As a result, separate LTI allowances will be introduced for these two groups with effect from 1 January 2018.

Having separate LTI allowances for FTBs and SSBs will improve the stability and effectiveness of the mortgage measures by ruling out swings in the allocation of allowances across the two groups.

This will be a matter for individual lenders, based on an evaluation of each specific borrower and the lender’s own credit policies. The limits are supplementary to individual banks' credit policies and are not designed as a substitute for lenders’ responsibilities to assess affordability and lend prudently.

No. Lenders are still required to assess each loan application on a case-by-case basis. Ultimately, the amount of any loan offered is a matter for individual lenders, but only a proportionate level of mortgages as specified in the mortgage rules will be allowed to exceed the LTV and LTI limits.

The mortgage measures apply to mortgages secured on residential property in the State. Equity releases and top-ups on existing mortgages will also continue to be covered by the measures.

Mortgages out of scope of the measures remain as follows: 

The LTV and LTI limits do not apply to switcher mortgages or mortgages entered into in order to address arrears or pre arrears.

• The LTI limits apply to mortgages for borrowers in negative equity who are selling their home and wish to obtain a mortgage for a new property.
• The LTV limits do not apply. However, the usual lending standards of individual banks apply to these borrowers. In the case of joint mortgage applications, if one borrower is under a negative equity loan, the full application is considered to be a negative equity loan and so is in scope of the LTI limit.
• The LTI limits do not apply to housing loans for non-PDH purposes (i.e. buy–to-let).

If you have approval in principle, supported by a full credit assessment, prior to 1 January 2018, you are not affected by the changes to the mortgage measures for the duration of your mortgage approval.

However if you apply, or reapply, for a mortgage from 1 January 2018 onwards your application will be assessed under the revised mortgage measures announced as part of the 2017 Review.