"Bank of Ireland to tighten home lending criteria amid rising rates"

The bank has told mortgage brokers that it is continuing to monitor the repayment capacity of new mortgage applicants against potential rate increases that may occur over the life of a loan. It said that adjusted calculators assessing affordability will be live from next Tuesday.

Bank of Ireland did not indicate to brokers what changes it will be making to its stress testing.

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ICS also imposed a stipulation that prospective borrowers must show that they will have €1,000 at the end of every month, after monthly living expenses and mortgage payments at current rates, to secure a new home loan, according to sources.

Finance Ireland decided last week to impose a similar type of buffer, but at a lower monthly level of €250 for new business, sources said.

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AIB said on Wednesday that it will make a decision on rates within weeks.

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In most cases the Central Bank criteria will be more binding than the bank's own criteria though, even still.

NoRegretsCoyote said:

In most cases the Central Bank criteria will be more binding than the bank's own criteria though, even still.

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This article in the Indo says:

Borrowers are being told that even though they can borrow a certain amount based on the income limits set by the Central Bank, the impact of cost-of-living increases on disposable income are trumping this.

Not all borrowers are affected, but the cost of living rises are proving problematic for many first-time buyers and switchers, particularly single people and single-earner families, Ms Hennessy said.

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Why are they taking it upon themselves to add to the Central Bank's criteria? Surely it's this kind of carry-on that will have a bigger knock-on effect on affordability than higher interest rates. Cost-of-living varies according to household and to my mind should be none of the banks business.

Banks are completely free to have more strict rules than the Central Bank - the banks carry here the risk of default/ borrower getting into trouble - not the Central Bank who only only puts up some ground rules in place. It is absolutely prudent of a bank to do their own risk assessments and if the economic situation changes to adapt lending criteria/ stress tests. One can question if one a showed a repayment capability over the last 6 months and if is still the same now with that high inflation. There is no human right to be approved for a mortgage - cost of living/repayment capability is definitely a criteria banks will look at.

MelF said:

Why are they taking it upon themselves to add to the Central Bank's criteria? Surely it's this kind of carry-on that will have a bigger knock-on effect on affordability than higher interest rates. Cost-of-living varies according to household and to my mind should be none of the banks business.

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Firstly, the Central Bank criteria are generalised across the industry. Banks themselves will have different risk appetites for a variety of reason (e.g. their existing back book of mortgages, and their derivative positions). It's completely reasonable for a bank to take a more conservative position than the blunt LTI/LTV maximums set by the Central Bank.

Secondly, mortgage affordability is absolutely the bank's business, they're the ones lending hundreds of thousands of Euros. The have access to lots of customer cost-of-living data, and they're fully aware that it varies by household; that's built into the models.