Central Bank wants your views on the mortgage lending limits

Brendan Burgess

Founder
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Press Release - 14 July 2021

Have your say on the Central Bank’s Mortgage Measures Framework Review



· First review of the overall policy framework for the mortgage measures since their introduction in 2015.

· Engagement with the public will be a core element of that review.

· Review aims to ensure that the Central Bank’s policy framework remains fit for purpose into the future, amid continued evolution of the financial system and economy.

The Central Bank of Ireland has commenced a comprehensive review of the policy framework for the mortgage measures. The mortgage measures were introduced in 2015 to support a sustainable provision of mortgage finance, strengthening the resilience of borrowers and lenders and guarding against the risk that another credit-fueled housing boom emerges.

The review of the overarching framework aims to ensure the mortgage measures continue to remain fit for purpose into the future, in view of the continued evolution of our financial system and economy. While the annual assessment of the measures will take place as usual later in the year, this broader review will focus on the overall policy framework, strategy and toolkit for the mortgage measures.

As part of this process, we want to hear from the public on their own experiences. To allow as many people as possible to input we have launched a new online survey. The public survey invites people to share their views and experiences on the functioning of the mortgage measures to date, their perspectives on what a sustainable mortgage market looks like, and what elements of the mortgage measures they think the Central Bank’s review should focus on. This will inform the framework review, which will run throughout 2021 and 2022.

Director of Financial Stability, Vasileios Madouros, said: “The mortgage measures are an integral and permanent feature of Ireland’s macroprudential policy framework. Since their introduction, they have played a key role in building resilience of both borrowers and lenders and have guarded against the emergence of an unsustainable, credit-fuelled housing boom.

“In line with best practice, in addition to assessing the functioning and calibration of the measures every year, we believe it is important to occasionally review the overall policy framework, strategy and toolkit. This will ensure the mortgage measures remain fit for purpose, not just now, but into the future.

“Engagement with the public will be a core element of our review. We know that behind the economic data and evidence that we look at, lie people’s own lived experiences. Understanding those experiences better will strengthen the effectiveness of our review. So I encourage people to complete our online survey.”

The survey will close at 17:00 on 30 July 2021 and can be completed in English at centralbank.ie/survey or Irish at centralbank.ie/suirbhe

ENDS

Notes to Editor


Further information on the Central Bank Mortgage Measures can be found on the Central Bank’s website and in our Explainer “What are the mortgage measures?”

Further information
 

Brendan Burgess

Founder
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44,150
I filled in the survey.

Theme 2 – Describing a sustainable mortgage market

What does a sustainable mortgage market mean to you? For example, what do you think is a manageable and sustainable amount of debt to take on in order to purchase a property?

What are the best ways to avoid repeating mistakes of the past in terms of excessively loose lending standards leading to widespread financial distress?


My reply:

What is sustainable rent?

A mortgage is just renting money.

So while someone can afford to pay the interest on their mortgage it is sustainable for them.

It is also very profitable for the lender. The lender should not want a borrower who is paying market rate interest to repay capital. They will only lend it out again.

The idea that a mortgage must be repaid in full by age 65 , has evolved from custom and practice. there is really no rational basis for it.

Having said all that, a 90% mortgage is risky for both borrower and lender. In fact, an 80% mortgage is risky for both borrower and lender.

But once a borrower has reduced the mortgage to below 60% of the value of the property, there should be no obligation on them to repay further capital.

Of course, it may be the right thing for the borrower to do - to clear their mortgage before investing in a pension or buying a new car. But that should be their choice.




Any other feedback

The lack of supply and high prices are caused by government policy.

It is not the role of the Central Bank to attempt to fix these problems through allowing reckless lending.

The medium to long term objective of the measures should be a maximum LTV of 80% for First Time Buyers and 70% for SSBs.

The lack of supply and high prices are caused by government policy.

It is not the role of the Central Bank to attempt to fix these problems through allowing reckless lending.

The medium to long term objective of the measures should be a maximum LTV of 80% for First Time Buyers and 70% for SSBs.

I have long called for the Central Bank to define what a sustainable mortgage is. That was in the context of mortgage arrears. It is now time for the Central Bank to discuss this issue and produce a definition which would provide guidance to borrowers and the courts.
 

Sarenco

Registered User
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6,782
I completed the survey and suggested that the measures should be retained with the following two tweaks -

1. Replace LTI limit with a (total) debt-to-income (DTI) limit; and
2. Set the DTI ratio at 4:1, to reflect the falls in mortgage rates since 2015.
 

MugsGame

Frequent Poser
Messages
2,637
I've worked in references to non-recourse loans and pensions (even if I can't borrow from my pension, this could form part of the affordability criteria - I should not be penalized by saving for a pension).
 
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