New regulations were announced in 2015 by the Irish Central Bank that set lending limits for mortgages in Ireland .
These mortgage lending regulations first came into force in February 2015 and were amended slightly in January 2017. They will also have a small change in Jan 2018 (see below)
The lending restrictions relate to
- The percentage of the house value that can be lent. ( The LTV or Loan to Value)
- Income multiples.
It is important to note that every individual mortgage will not be subject to these exact limits . Banks can lend more than the specified limits in some cases – but they have to stick to annual targets on the amount of mortgage loans that they allow to go over these limits.
There are different limits for different categories of buyers:
A) Principal Residence (Owner Occupiers) LTV Restrictions
Every individual mortgage will not be subject to these exact limits – but the banks will have to ensure that at least 85% of the total value of mortgages issued each year for principal dwellings do not breach the limits given below.
- non-first time buyers are subject to a limit of 80% LTV. (20% of lending can exceed this cap)
- first time buyers – since Jan 2017 the maximum loan allowed is now 90% of the house value. (Lenders are allowed to exceed this 90% limit in 5% of cases) . You can see some example figures of How Much You Can Borrow Here
- Switcher mortgages and housing loans for the restructuring of mortgages in arrears or pre-arrears are not in the scope of the Regulations.
Note – (Borrowers in negative equity who wish to obtain a mortgage for a new property are not within the scope of the new LTV limits.)
B) Owner Occupier Mortgages – Income Restrictions
There are also limits on the size of loans compared to the income of the borrowers. The Loan to Income Ratio Or LTI on Owner occupier mortgages cannot be more than 3.5 times the borrowers gross income.
Again – this limit is not strictly applied to every individual mortgage – but the banks must ensure annually that at least 80% of their home loans to owner occupiers (by value) have this income restriction applied.
Note : From Jan 2018 this will change for Second Time Buyers – and banks will only be able to exceed the loan to income ratio in 10% of cases
C) Buy to Let mortgages (BTL)
BTL mortgages are now subject to a limit of 70% LTV.
Each individual mortgage is not subject to this limit – but the banks must ensure that at least 90% of their BTL mortgages each year (by value) have this LTV limit of 70% applied.
There are No income related limits for Buy to Let mortgages.
First Time Buyers might be interested in reading about the new Help to Buy Scheme that is now up and running and can provide up to 5% of the deposit on a new build home.
See some examples of How Much You Can Borrow Here