Dáil Éireann Debate, Tuesday - 30 June 2020
74. Deputy Jennifer Whitmore asked the Minister for Finance if loan-to-value, LTV, exemptions have been stopped since Covid-19; the representations he has made to the banking sector on behalf of homeowners that cannot borrow due to banks no longer issuing LTV exemptions in circumstances in which a 20% deposit is not achievable particularly for those in negative equity; and if he will make a statement on the matter. [13565/20]
View answerThe Central Bank has statutory responsibility for the regulation of mortgage lending by banks and other regulated entities and, in line with its independent mandate to preserve and protect financial stability in Ireland, it introduced macro-prudential measures for residential mortgage lending by such institutions in February 2015. The objective of these mortgage measures is to increase the resilience of the banking sector and households to reduce the risk of credit-house price spirals from developing.
These macro-prudential measures apply certain loan-to-value (LTV) and loan-to-income (LTI) restrictions to residential mortgage lending by financial institutions regulated by the Central Bank. The current restrictions, which have not changed since the impact of Covid-19, comprise an LTI limit of 3.5 times the borrower’s income; in respect of the LTV limit, for first time primary dwelling borrowers it is 90% of the value of the residential property and 80% for second and subsequent buyers (for buy to let mortgage borrowers the LTV limit is 70%).
However, the macro-prudential mortgage lending framework also provides a certain allowance or discretion to lender to exceed these LTI and LTV limits. For example, in any one calendar year, lenders can give an LTV allowance to:
- Up to 5% of the value of mortgages to first time primary dwelling buyers
- Up to 20% of the value of mortgages to second and subsequent primary dwelling buyers
- Up to 10% of the value of mortgages to buy-to-let buyers.
In addition, the mortgage lending measures provide that borrowers who are currently in negative equity and want to move home by purchasing another property are exempt from the LTV limits.
However, the utilisation and allocation of these exemption allowances is solely a matter for individual lenders, having regard to the lender’s own credit policies and based on an evaluation of each specific borrower. Therefore, subject to compliance with this macro prudential residential mortgage lending framework, and also to compliance with all the other relevant legal and regulatory requirements governing the provision of mortgage credit to consumers including the relevant provisions of the European Union (Consumer Mortgage Credit Agreements) Regulations 2016 and the Central Bank’s Consumer Protection Code 2012 ‘Knowing the Consumer and Suitability’ obligations, it remains a matter for each mortgage lender to set its own mortgage lending policies and to make its own mortgage lending decisions in individual cases and it is not appropriate or possible for me to instruct lenders in that regard. Nevertheless, it should also be noted that the Central Bank has indicated that it expects all regulated firms to take a consumer-focused approach and to act in their customers’ best interests at all times, including during the COVID-19 pandemic. In addition, my Department maintains close contact with the Central Bank and Banking & Payments Federation Ireland as the lending industry works to address the difficulties the COVID-19 situation is causing for both borrowers and lenders.
