The Central Bank of Ireland’s macroprudential mortgage lending measures, which were first introduced in February 2015, are aimed at enhancing the resilience of both borrowers and the banking sector. The mortgage measures limit the amount of finance that an individual or a couple can borrow to buy residential property. These limits are based on the income of the borrower (loan-to-income limit), and the value of the property (loan-to-value limit).
The Central Bank recently published its 2018 Review of Mortgage Market Measures. The analysis carried out by the Bank as part of this review confirms that the mortgage measures are achieving the Central Bank’s objectives and are contributing to overall financial stability.
The Central Bank advises that the rules, and exemptions, are based on mortgage loan drawdowns and not approvals. The date of drawdown determines which “relevant period” (currently defined as a calendar year) that the housing loan is included in for the purposes of calculating lenders’ compliance levels. Exemptions are calculated as a function of the overall level of qualifying lending during the relevant period, and no restrictions apply based on an overall loan book.
Subject to the macroprudential mortgage measures, each lender is responsible for managing its compliance with the limits of the mortgage rules. Specifically, how a lender assigns exceptions to individual borrowers is a matter for the individual lender, and based on an evaluation of each specific borrower and the lender’s own credit policies. Lenders will also have their own credit policies and the mortgage lending rules are not a substitute for lenders’ responsibilities to assess affordability and lend prudently.
In relation to any incentive offered to consumers, the Central Bank requires lenders to provide inter alia, all relevant information to consumers including the advantages and disadvantages of availing of the incentive, in order to enable the consumer to consider the incentive offered in the context of their own individual circumstances.
In addition, all regulated lenders are required to ensure that in all of their dealings with customers they act honestly, fairly and professionally in the best interests of customers and the integrity of the market.