Mortgage Lending Regulations for Residential Property in Ireland
Borrowers in Ireland are now subject to the Mortgage Lending Regulations laid by the Central Bank of Ireland on the 27th January 2015. The regulations apply limits to mortgage lending by regulated Banks and Building Societies in the Irish market. The intention of the Central Bank is to introduce controlled lending to avoid a repeat of the overheated property market of the prior economy and to reduce the risk of bank credit and house price spirals from developing in the future.
The measures introduce proportionate limits for loan to value and loan to income measurements for both primary dwelling houses and buy to let mortgages. bank are still nonetheless obliged to apply their existing criteria for stress testing borrowers. the centrla regulaiton comprise the outer limits that banks and Building Societies must work within in issuing mortgages to buyer of property in Ireland.
The lending criteria are summarised as follows:
A. Loan to Value (LTV) for principal dwelling houses (PDH):
There are different limits for different categories of buyers:
- PDH mortgages for non-first time buyers are subject to a limit of 80 per cent LTV.
- For first time buyers of properties valued up to €220,000, a maximum LTV of 90 per cent will apply. For first time buyers of properties over €220,000 a 90 per cent limit will apply on the first €220,000 value of a property and an 80 per cent limit will apply on any excess value over this amount.
- The cumulative monetary value of loans for principal dwelling purposes which breach either of these limits should not exceed 15 per cent of the euro value of all PDH loans on an annual basis.
Housing loans for borrowers in negative equity who wish to obtain a mortgage for a new property are not within the scope of the LTV limits.
B. Loan to Value (LTV) for Buy to Let mortgages (BTLs)
- BTL mortgages are subject to a limit of 70 per cent LTV.
- This limit can only be exceeded by no more than 10 per cent of the euro value of all housing loans for non PDH purposes during an annual period.
C. Loan to Income (LTI) for PDH mortgages
- PDH mortgage loans are subject to a limit of 3.5 times loan to gross income.
- This limit should not be exceeded by more than 20 per cent of the euro value of all housing loans for PDH purposes during an annual period.
Importantly switcher mortgages and housing loans for the restructuring of mortgages in arrears or pre-arrears are not falling within the scope of the Regulations.
If you are considering buying a property, call us today and we will guide you through the often complex and difficult process of purchase and advise and assist you with your mortgage. Our Dublin city centre solicitor offices are welcoming and our service is personable. We provide up front detailed written quotations at very competitive rates for all property transactions and we agrees fees in advance so there are no surprises.