Brendan Burgess
Founder
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The full submission can be viewed on the BPFI website [broken link removed].
In its submission on the Central Bank of Ireland’s consultation on Macro Prudential Policy for Residential Mortgage Lending Banking & Payments Federation Ireland (BPFI) supports the proposed loan to income (LTI) measure for principal dwelling house (PDH) loans and supports the proposed loan to value (LTV) measure for buy to let (BTL) loans. However, BPFI has significant concerns about the impact of proposed LTV measure for PDHs and about the potential for mortgage insurance as proposed.
BPFI and its member banks recognise the importance of ensuring the stability of the banking system and of protecting households from the risks of over-indebtedness. We are in agreement with the Central Bank on the need to ensure that a “credit-driven bubble does not take hold” and believe that responsible lending through a robust credit assessment process is key to delivering the improved resilience and stability of the financial system. Member banks adhere to internal governance models in developing robust credit policy and standards for all new lending which must also meet capital requirements, a driver of the European financial stability regime.
BPFI and its member banks also acknowledge that macro prudential tools have a valid role to play in the supervision/regulation of the banking system. However, we note from the CBI consultation paper that there “is little indication at present of bank credit being an important driver of the recent increase in property prices in Dublin, with the volume of new lending still very low”. This assessment mirrors that of our members who also see no evidence of a credit driven bubble in property prices and point to cash buyers as playing a significant role in this regard.
The proposed application of an LTV of 80% on PDH loans is neither necessary nor appropriate for the mortgage market at this point in the cycle. In our view the proposal would give rise to significant unintended consequences which include the following:
BPFI and its member banks are keen to work with the Central Bank to explore how best these issues and potential – but as yet undetermined – related outcomes could alternatively be addressed.
- Support for proposed Loan to Income measure for principal dwelling house
- Support for proposed Loan to Value measure for buy to lets
- Concerns about proposed Loan to Value measure for principal dwelling house
In its submission on the Central Bank of Ireland’s consultation on Macro Prudential Policy for Residential Mortgage Lending Banking & Payments Federation Ireland (BPFI) supports the proposed loan to income (LTI) measure for principal dwelling house (PDH) loans and supports the proposed loan to value (LTV) measure for buy to let (BTL) loans. However, BPFI has significant concerns about the impact of proposed LTV measure for PDHs and about the potential for mortgage insurance as proposed.
BPFI and its member banks recognise the importance of ensuring the stability of the banking system and of protecting households from the risks of over-indebtedness. We are in agreement with the Central Bank on the need to ensure that a “credit-driven bubble does not take hold” and believe that responsible lending through a robust credit assessment process is key to delivering the improved resilience and stability of the financial system. Member banks adhere to internal governance models in developing robust credit policy and standards for all new lending which must also meet capital requirements, a driver of the European financial stability regime.
BPFI and its member banks also acknowledge that macro prudential tools have a valid role to play in the supervision/regulation of the banking system. However, we note from the CBI consultation paper that there “is little indication at present of bank credit being an important driver of the recent increase in property prices in Dublin, with the volume of new lending still very low”. This assessment mirrors that of our members who also see no evidence of a credit driven bubble in property prices and point to cash buyers as playing a significant role in this regard.
The proposed application of an LTV of 80% on PDH loans is neither necessary nor appropriate for the mortgage market at this point in the cycle. In our view the proposal would give rise to significant unintended consequences which include the following:
- the immediate and continued exclusion of cohorts of potential home owners, in particular First Time Buyers with savings of less than 20% of the purchase price of a property
- the potential for applicants to seek funds from other lenders, family, friends etc; or to defer payments to pensions, insurance policies and other beneficial long term investments in order to accumulate the proposed level of deposit funds
- the impact on ongoing housing supply issues, particularly for potential new developments, driven by uncertainty regarding demand drivers.
BPFI and its member banks are keen to work with the Central Bank to explore how best these issues and potential – but as yet undetermined – related outcomes could alternatively be addressed.