The Central Bank of Ireland has put in place certain requirements in relation to the provision of residential mortgage credit by regulated entities. These are set out in regulations made by the Bank under the Central Bank (Supervision and Enforcement) Act 2013. These mortgage measures are now a permanent feature of the mortgage market and the Central Bank is satisfied that they are operating in line with their stated objectives of enhancing the resilience of banks and borrowers to future shocks and reducing the risk of credit - house price spirals from developing.
The Central Bank introduced proportionate limits, or exemption allowances, for new lending above the stated loan to value (LTV) and loan to income (LTI) caps which apply to new residential mortgage lending. The proportionate limits allow lenders to make credit decisions based on an individual borrower’s circumstances, subject to the overall exemption limit amounts as permitted by the lending regulations. Notwithstanding these proportionate limits, lenders are still required to assess an individual borrower’s affordability and to lend prudently on a case-by-case basis, in line with the requirements of the Consumer Protection Code and other regulatory requirements. The utilisation of these exemption allowances are monitored on an annual basis by the Central Bank in order to check compliance by lenders, and are evaluated relative to mortgage drawdowns.
The current calibration of the mortgage lending exemption measures permits lenders, in respect of the LTV limits, to provide up to 5% of new lending to first time buyers (FTBs) above the applicable 90% LTV cap and for non-first time buyers (non FTBs) to provide up to 20% of new lending above the 80% LTV cap. For buy to let mortgages, up to 10% new lending can exceed the 70% LTV cap. In respect of the 3.5 times LTI limit which applies to all PDH lending, up to 20% of new lending to FTBs and up to 10% of new lending to non FTBs can exceed this cap. (In addition certain types or categories of mortgage lending will also fall outside the LTV or LTI or both restrictions).
The table attached provides the number and value of PDH and BTL mortgages which received either an LTV or LTI exemption allowance from the time the lending rules were introduced in February 2015 to end June 2018.
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PDH LTI Allowances
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PDH LTV Allowances
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BTL LTV Allowances
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Year
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No.
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Value (€m)
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No.
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Value (€m)
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No.
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Value (€m)
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2015
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1,976
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442.22
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1,322
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329.33
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34
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4.37
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2016
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2,655
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663.15
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2,058
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591.92
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25
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3.69
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2017
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4,471
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1,220.02
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1,892
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546.20
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34
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7.58
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2018H1
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1,883
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556.10
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753
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237.10
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14
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2.30
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