Dáil Éireann Debate, Tuesday - 17 January 2017
85. Deputy Joan Burton asked the Minister for Finance if his Department has had discussions with the Central Bank regarding mortgage deposit requirements for prospective first-time buyers seeking to purchase their home who cannot save a sufficient deposit due to rising residential rent costs; and if he will make a statement on the matter. [1649/17]
Amharc ar fhreagra298. Deputy Joan Burton asked the Minister for Finance the status of the ongoing review of the Central Bank mortgage lending limits as specified in the programme for Government; the role of his Department in the review process; and if he will make a statement on the matter. [1673/17]
Amharc ar fhreagraI propose to take Questions Nos. 85 and 298 together.
The Central Bank announced the outcome of its review of the residential mortgage lending macro prudential measures on 23 November 2016. As part of the review process, the Central Bank initiated a public call for "evidence based submissions". The Department of Finance engaged in this process and it made a submission which the Central Bank has now published, along with all the other submissions it received, on its website at: http://www.centralbank.ie/stability/MacroprudentialPol/Pages/LoantoValueLoantoIncome.aspx#submissions. The Central Bank also consulted me, pursuant to section 49 of the Central Bank (Supervision & Enforcement) Act 2013, on the draft regulations which set out the proposed changes to the lending rules following the outcome of its review. These regulations have now been laid before the Houses of the Oireachtas.
These new regulations make certain refinements to the mortgage lending rules which were initially introduced in February 2015. In relation to first time buyers of a principal dwelling home, such buyers are now required to provide a minimum deposit of 10 per cent of the entire value of the property, with the loan-to-value (LTV) ceiling set at 90 per cent. This replaces the previous situation whereby a deposit of 10 per cent was required on the first €220,000 of the price of a property and 20 per cent on any balance above €220,000. The Central Bank has indicated that this change was made because the previous system was complex and would require regular updating and also that there was evidence showing that first-time buyers defaulted less than second-time and subsequent buyers, with the differential in default probabilities especially strong in the case of lower-valued properties. In addition, the Central Bank made some changes to proportionate LTV allowances regime and in relation to first time buyers they now provide that up to five per cent of the value of new lending to first time buyers can be above the 90 per cent LTV threshold limit.
