Mortgage Lending Rules in Ireland
In 2015, the Central Bank of Ireland introduced mortgage measures in order to encourage financial and economic stability. These rules (often referred to as macroprudential rules), were brought in by the Central Bank to ensure sustainable lending standards in the Irish mortgage market.
Reasons why the Central Bank introduced these measures:
- To prevent an unrealistic relationship between credit people were taking out in the form of loans and house prices (as witnessed in the “property crash” in 2008).
- To encourage a healthier environment for borrowers, lenders and the economy in general.
What are the new rules for mortgages?
In October of 2022, the Central Bank announced upcoming new rules for mortgages. They explained as part of this release that having carried out various “engagements” including a survey encompassing 4000 respondents, they realised a review of rules was needed. They also carried out further public consultation, including forums and conferences; they also reviewed the experiences of other countries who had similar measures in place with their macroprudential rules.
Prior to January 2023’s changes in mortgage rules, first time buyers (borrowers) were limitedto 3.5 times their salary. For non-first-time-buyers, the limit in January 2023 will stay at 3.5 times their annual salary but second time or “subsequent” buyers will require a 10% deposit where previously they required 20% deposit.
For properties that will not be a primary residence, including buy-to-let properties, a limit of 70% LTV applies thus requiring a 30% deposit on a property.
Mortgage Lending Limits
The measures set limits on the amount of money that can be borrowed to buy residential property using:
- Loan-to-Income (LTI) limit - the ratio of the size of the loan to the income(s) of the borrower(s). For example, a first-time buyer couple with a combined income of €100,000 can borrow up to a maximum of €400,000.
- Loan-to-Value (LTV) limit - the ratio of the amount borrowed (the mortgage) and the value of the property. If a property value is €300,000 and the mortgage is €270,000, then the LTV is 90%.
Can you get a mortgage 4.5 times your salary in Ireland?
The only way to get a mortgage at 4.5 times your salary in Ireland is via an exemption (also known as a “mortgage exception”). Every year, mortgage lenders can step outside the usual rules to assign 15% of mortgages up to 4.5 times the applicant’s income. In general though, since January 2023, borrowers can avail of mortgages at four times their salary. You can read more about mortgage exemptions in our guide.