Q&A – The Latest on New Mortgage Lending Rules.
Q: What is the latest on new mortgage lending rules?
A: The Central Bank Commission, which is the board, decided yesterday on the shape of new lending restrictions.
The proposals were first published last October, with the regulators calling for consultations.
Q: So what are the rules to be now?
A: Basically, first-time buyers will be able to get a mortgage with a deposit as low as 10% of the property value for amounts up to €220,000.
For any amounts over that there will have to be a 20% deposit.
This means that borrowers seeking a mortgage for €300,000 will need a deposit of €38,000.
Non-first-time buyers will have to have a deposit of 20%.
Q: Will this apply to every mortgage?
A: No, banks will be able to issue 15% of their mortgages outside of these new deposit rules.
Q: And is there more?
A: The income limits on borrowings of no more than three-and-a-half times earnings will apply.
This means a couple, both on the average wage and so earning around €70,000, will be restricted to borrowing €245,000.Smurfs: The Lost Village movie streaming
Q: What about people who want to move but are in negative equity?
A: People in negative equity – those who owe more than their home is worth – will be exempted from the new rules on deposits.
Q: Why is this needed?
A: The Central Bank does not want banks to overextend themselves again by giving out mortgages that are greater than borrowers can manage.
Q: Remind me again about the original proposal last October
A: Governor Patrick Honohan and his deputy Cyril Roux proposed that the majority of mortgages – for both first-time buyers and second- and third-time buyers – should have a 20% deposit before they get approved.
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In other words, banks will not be able to lend more than 80% of the loan-to-value (LTV) in most cases.
Q: So there has been some rowing back here?
A: Yes, the original proposals caused a storm of protest, with people saying first-time buyers would be shut out of the market.
Q: Will the controversy be over now?
A: No. Buyers in Dublin will have to come up with bigger deposits than those purchasing outside the M50 corridor. House prices outside the capital are half of those that pertain in Dublin and its suburbs.
And developers stopped building when the proposals were first announced last October. Whether they start building again remains to be seen.
Q: So what will happen to house prices now?
A: There have been some signs that the runaway house price growth, particularly in Dublin, has eased off.
That could well be down to the impact of the proposed rules already cooling the market.
But it could also be down to the end of tax breaks for residential property investors, as well as fewer cash buyers in the market. With the new rules, the Central Bank will hope that the strong rises in the property market will tail off.