As part of its goal to safeguard financial stability and contribute to the long term resilience of the financial system, the Central Bank has in place a series of mortgage measures. These measures were first introduced in 2015 and are reviewed on an annual basis. The measures are designed to ensure that banks and other lenders lend money sensibly. They are also designed to stop house buyers from borrowing more than they can afford and prevent excess credit from building up within the Irish financial system.
The measures set ceilings on the amount of money that can be borrowed to buy residential property using:
- Loan to Value (LTV) limits
- Loan to Income (LTI) limits.
The LTV limit requires you to have a minimum deposit before you can get a mortgage. The size of this deposit depends on what category of buyer you are.
- First-time-buyers need to have a minimum deposit of 10%
- Second and subsequent buyers need to have a minimum deposit of 20%
- Buy-to-let buyers need to have a minimum deposit of 30%.
Banks and other lenders have the freedom to lend a certain amount above these limits. In any one calendar year they can give an allowance to:
- Up to 5% of the value of mortgages to first time buyers
- Up to 20% of the value of mortgages to second and subsequent buyers
- Up to 10% of the value of mortgages to buy-to-let buyers.
The LTI limit restricts the amount of money you can borrow to a maximum of 3.5 times your gross income. So for example, a couple with a combined income of €100,000 you can borrow up to a maximum of €350,000.
Once again banks and other lenders have the freedom to lend a certain amount above these limits. In any one calendar year they can give an allowance to:
- Up to 20% of the value of mortgages to first-time buyers
- Up to 10% of the value of mortgages to second and subsequent buyers
Ireland is not alone in introducing these kinds of mortgage measures. Many other EU countries have introduced some form of mortgage regulation to help safeguard their national financial systems.
In accordance with the provisions of the Consumer Credit Act 1995, the following are for your attention:
Warning: Your home is at risk if you do not keep up payments on a mortgage or any other loan secured on it. The payment rates on this housing loan may be adjusted by the lender from time to time.
Note: The above notice in respect of adjustments to repayment rates will not apply during any period when the loan is at a fixed rate.
In accordance with the provision of the Consumer Protection Code (CPC) 2012 the following are for your attention:
Warning: If you do not keep up your repayments you may lose your home.
Warning: If you do not meet the repayments on your loan, your account will go into arrears. This may affect your credit rating which may limit your ability to access credit in the future.
The following warning applies in the case of variable rate loans:
Warning: The cost of your monthly repayments may increase.
The following warning applies in the case of fixed rate loans:
Warning: You may have to pay charges if you pay off a fixed rate loan early.
The following warning applies in the case of debt consolidation loans:
Warning: This new loan may take longer to pay off than your previous loan. This means that you may pay more than if you paid over a shorter term