The Central bank has announced changes to their mortgage lending limits this morning, October 19, which will come into effect in January 2023.
These changes will see an ease of mortgage rates for first-time buyers after the Central Bank reviewed their lending rules which have been in place since 2015 to prevent another financial crash that the country has seen previously.
The Central Bank has now stated that from January 2023, first-time buyers will be able to borrow up to four times their gross income. Currently, first-time buyers can only be offered to borrow up to 3.5 times their income from lenders.
The requirement for a 10% deposit will not change for first-time buyers.
For second and subsequent buyers, the loan-to-income limit will not change, meaning they can still only borrow up to 3.5 times their gross income.
But, second and subsequent buyers’ deposit requirement needed to secure a loan for a property, which was at 20%, is being lowered to 10%, so will be the same as first-time buyers.
Today, the Central Bank of Ireland announces targeted changes to lending rules following its overarching review of the mortgage measures framework. https://t.co/d773mOOXpr pic.twitter.com/DbmNwMkcoL
— Central Bank of Ireland (@centralbank_ie) October 19, 2022
The loan-to-value for buy-to-let buyers will remain at 70%.
Changes are also being made on the criteria required for a borrower to be considered a first-time-buyer, which include a “fresh start” perspective.
This means borrowers who are divorced or separated, or have undergone bankruptcy or insolvency may be considered a first-time-buyer for the mortgage measures, as long as they don’t have an interest in the previous property.
When talking about this new review, The Governor of the Central Bank of Ireland, Gabriel Makhalouf said, “The mortgage measures are essential in our mission to serve the public by maintaining the financial stability of the economy and households as a whole, so it is good policy practice to review these given the broader changes in the economy”.
“While not always immediately visible to people in their daily lives, the benefits of the measures are long-term”.
He continued, “The review shows the measures have increased the resilience of borrowers, lenders and the broader economy. However, we are acutely aware that like all policy interventions, the mortgage measures have both benefits and costs to society”.
“A lot has changed since the measures were first introduced. The changes we are announcing are both targeted and proportionate, and recognise the resilience built up over the last decade and the structural changes across the economy”.
