Dáil Éireann Debate, Tuesday - 17 November 2020
251. Deputy Neale Richmond asked the Minister for Finance if he has had an engagement with the Central Bank regarding the deposit ratio to secure a mortgage which for many persons is the biggest hurdle to home ownership; and if he will make a statement on the matter. [36294/20]
View answerThe Central Bank of Ireland, as part of its independent mandate to preserve and protect financial stability in Ireland, has statutory responsibility for the regulation of mortgage lending by banks and other regulated entities. In line with this mandate, the Central Bank introduced macro-prudential measures for residential mortgage lending by such institutions in February 2015. The objective of these macro prudential measures is to mitigate systemic risk and promote financial stability, to increase the resilience of the banking sector and households to the property market and to reduce the risk of credit spirals from developing in the future. 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. In general, the maximum mortgage limits are 3.5 times the borrower’s income and, for first-time buyers, 90% of the value of the residential property. For second and subsequent buyers the maximum mortgage are 3.5 times the borrower’s income and 80% of the value of the residential property.
However, under the mortgage lending rules framework, banks and other mortgage lenders have a certain flexibility to provide a mortgage loan in excess of the specified LTV and LTI regulatory limits. For example, the rules allow lenders to provide up to 20 per cent of their mortgage lending to second and subsequent buyers in excess of the 80 per cent LTV threshold. In addition, borrowers who are currently in negative equity and want to move home by purchasing another property are exempt from the LTV limits.
These, however, are discretionary exemptions and it is a commercial matter for each individual lender to decide, having regard to its own lending policies and loan underwriting criteria, whether or not it wishes to avail of those various discretions. Ultimately, subject to the requirement to comply with the provisions of the macro-prudential mortgage lending rules, the Central Bank Consumer Protection Code and other regulatory requirements, it is a matter for each lender to decide whether or not to provide a loan in any particular case, or how much mortgage credit to provide in any particular case. I as Minister for Finance, do not have a role in the commercial decision making processes of credit institutions . This is a commercial matter for each individual credit institution having regard to the relevant legal and regulatory requirements which apply.
The lending rules were last reviewed in November 2019 with the Central Bank Commission concluding that the mortgage measures as calibrated at that time continued to be effective and no change to the mortgage lending regulations was made. It is expected that the Central Bank’s 2020 review of the macro prudential mortgage lending measures will be concluded before the end of the year.
The Central Bank’s consumer protection framework also includes a number of measures to protect consumers who are taking out a mortgage and seeks to ensure that lenders are transparent and fair in all their dealings with borrowers and that borrowers are protected from the beginning to the end of the mortgage life cycle. The Consumer Protection Code 2012 requires regulated entities to carry out affordability and suitability assessment, prior to offering, recommending, arranging or providing a credit product to a personal consumer. Separately, the European Union (Consumer Mortgage Credit Agreements) Regulations 2016 require that creditors assess the creditworthiness of the consumer before concluding a credit agreement.
However, subject to the requirement to comply with the relevant legal and regulatory requirements which govern the provision of residential mortgage credit to consumers, as indicated it is ultimately a commercial matter for an individual lender to decide whether to offer particular products or whether to provide a new mortgage loan or decide on how much credit to provide in any particular case.
