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 were subsequently reviewed in 2016 and 2017. 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%.
However banks and other lenders have the freedom to make a limited amount of exceptions to these limits. In any one calendar year they can give an exception 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 limit of 3.5 times your gross income.
So for example, if you are applying as a couple with a combined income of €100,000 you can borrow up to a maximum of €350,000.
However, once again banks and other lenders have the freedom to make a limited amount of exceptions to this rule. From 1 January 2018, in any one calendar year they can give an exception 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 mortgage measures like these. In fact 16 other EU countries have introduced some form of mortgage regulation to help safeguard their national financial systems.