The Central Bank has published its 2017 Review of Residential Mortgage Lending Requirements, and announced that it will be making very minor changes to its Residential Mortgage Regulations from 1 January 2018.
The key aspects of the Residential Mortgage Regulations will remain the same, but separate loan-to-income allowances will be introduced for first-time buyers, and for second-time buyers.
BACKGROUND
The Central Bank's Residential Mortgage Regulations were first published in 2016, and the Central Bank committed to reviewing those Regulations annually.
Last year, the Central Bank introduced a number of changes to the Regulations which took effect on 1 January 2017. For further information on last year's changes, read our November 2016 briefing: Central Bank Mortgage Regulations: Results of review announced.
2017 REVIEW
The 2017 Review notes that the risk profile of new mortgage lending has broadly developed in line with market developments over the last year. As a result, the loan-to-value (LTV) and loanto- income (LTI) limits are not being changed. However, the LTI allowances are being refined to differentiate between first-time buyers (FTBs) and secondtime and subsequent buyers (SSBs).
The table on the following page summarises the changes which will come into force on 1 January 2018.
The valuation provisions are also being refined. When calculating the value of collateral for a loan issued for construction purposes, the lender must take the lower of (a) the estimated market value of the property after the works are completed and (b) the site cost plus the cost of works (estimated at the time that the mortgage loan is entered into).
| RULE | 2017 POSITION | 2018 POSITION |
| LOAN-TO-VALUE RESTRICTIONS | ||
| FTBs | Cap: 90% Minimum deposit: 10% |
No change |
| SSBs | Cap: 80% Minimum deposit: 20% |
No change |
| Buy-to-Let (BTL) | Cap: 70% | No change |
| Exemptions | Negative equity mortgage loans Refinancing/switcher
mortgages Alternative repayment arrangements (ARAs) |
No change |
| Lending Caps | FTBs: Up to 5% of new lending can exceed 90% cap SSBs: Up to 20% of new lending can exceed 80% cap BTLs: Up to 10% of new lending can exceed 70% cap | No change |
| LOAN-TO-INCOME RESTRICTIONS | ||
| FTBs | Ceiling: 3.5 x borrower's income | No change |
| SSBs (incl. negative equity) |
Ceiling: 3.5 x borrower's income | No change |
| Exemptions | BTL investors Refinancing/switcher mortgages ARAs | No change |
| Lending Caps | FTBs: Up to 20% of new lending for can exceed the cap SSBs: Up to 20% of new lending for can exceed the cap | FTBs: No change SSBs: Up to 10% of new lending can exceed cap |
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.
