As the Deputy is aware, in February 2015 the Central Bank introduced regulations on residential mortgage lending which applied proportionate limits to mortgage lending by regulated financial services providers in the Irish market. The key objective of these regulations is to increase the resilience of the banking and household sectors to the property market and to reduce the risk of bank credit and house price spirals from developing in the future.
The regulations introduced proportionate limits for Loan-to-Value (LTV) and Loan-to-Income (LTI) measurements for housing loans secured on residential property in the State. Income is set out in the regulation and means the total gross annual income, before tax or other deductions, of the borrower.
However, the Central Bank has advised that the limits are supplementary to individual banks' credit policies and are not designed as a substitute for lenders’ responsibilities to assess affordability and lend prudently on a case-by-case basis. This affordability assessment generally involves examining a borrower’s net disposable income which takes into consideration a number of factors including for example taxes, other debt obligations and may include pension contributions if applicable as per the individual firm’s credit policy.
