Brokers Ireland questions Central Bank’s mortgage rules

Brokers Ireland says Central Bank mortgage rules should not differentiate between first and subsequent buyers.

Responding to the Central Bank review of the macroprudential mortgage lending regulations, Brokers Ireland said the changes are insignificant but the existing rules remain too restrictive, especially for second and subsequent buyers with good repayment capacity.

Rachel McGovern, director of financial services at the organisation, which represents 1,300 broker firms, said there is no rationale for differentiating between first and subsequent buyers.

“The 90 per cent loan to value ratio should apply to all buyers, not just first-time buyers,” Rachel said. “And the 3.5 times gross income is too restrictive and should be eased to 4.5 times’ income for all buyers.

“Many who bought at close to or at the top of the market have been unable to move. As their negative equity diminishes and their housing needs change, the rules compel them to find 20 per cent deposit (80 per cent LTV ) before they can move. That is a mountain too high to climb for many.”

Ms McGovern said while the principle of macroprudential mortgage rules is good, in Ireland they were introduced far too early in the cycle and had the effect of locking many out of the market at the very time when prices were at their lowest.

“They had the effect of driving up rental prices, as we had predicted when they were introduced, to the extent that it has become cheaper to buy than rent in many parts of the country.The winners were cash buyers and investors, unfortunately,” she said.

Commenting on today’s Banking and Payments Federation Ireland figures, showing mortgage drawdowns for the first nine months of the year at just over €5 billion, she said while it shows positive momentum year-end will still show it is well slack of the €10 billion that could be considered normal.

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