The Governor of the Central Bank of Ireland, Philip Lane, announced the results of the Central Bank's review of its ; 2015 Mortgage Regulations on 23 November 2016. The Central Bank's view is that the Regulations are appropriate, have been successfully implemented and are leading to a reduced probability of default under mortgages taken out within the framework of the Regulations. A number of changes are being made to the Regulations, with effect from 1 January 2017. These changes are designed to "improve the sustainability and effectiveness of the current framework" and are set out in detail in the "What is changing, and what will remain the same?" table later in this Briefing. The changes can be summarised as follows:
- first-time buyers must now provide a minimum deposit of 10% of
the property value, with a loan-to-value (LTV)
ceiling of 90%;
- for lenders:
- 5% of the value of new lending to first-time buyers will be allowed above the 90% LTV limit for those buyers;
- 20% of the value of new lending to second and subsequent buyers will be allowed above the 80% LTV limit for those buyers;
- the valuation period has been extended from 2 months to 4 months; and
- the scope of the Regulations will be linked to the definition of "consumer" in the Consumer Protection Code (and to the definition of "consumer" used by the Financial Services Ombudsman) to confirm that large commercial landlords and developers are out of scope.
- for lenders:
While the Central Bank described these changes as "limited refinements", others have viewed them as significant in practice. The changes are welcome, and it is hoped that they will have a positive impact on the supply of mortgage loans.
The Central Bank introduced the Regulations in February 2015. The Regulations imposed caps on LTV and loan-to-income (LTI) ratios applicable to new residential mortgage lending from 9 February 2015 onwards.
In June 2016, the Central Bank sought submissions on the Regulations by 1 September 2016. 51 submissions were received by that deadline, including a submission from the Department of Finance (for further detail, see our recent Client Briefing: Resolving the Mortgage Arrears Crisis Volume 3/2016).
The Central Bank had emphasised that changes would only be made to the Regulations if it was presented with strong evidence to justify change.
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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.