There is a lot of confusion about the new Central Bank Mortgage rules at the moment. We have had many calls in the last month or so looking for clarity on the new rules and so I am writing this blog post to explain things as best I can.

There are two main changes to mortgage lending rules as follows,

1/ Loan to Income (LTI)

Mortgage borrowers are now restricted to borrowing 3.5 times their gross salary. So a First Time Buyer couple on a joint gross yearly salary of 50,000 will be restricted to a max mortgage of €175,000 (50,000 X 3 = 175,000).

2/ Loan to Value (LTV)

Mortgage loan to values are also now restricted to less than 90% for all borrowers apart from First time buyers looking to purchase for less than €220,000.

The new rules state that First Time Buyers can now borrow 90% of the first 220,000 of the purchase price plus 80% of the purchase price over and above 220,000. So for a first time buyer looking to buy for €300,000 their max mortgage would be €262,000. This is calculated as (220,000 X 90%) + (80,000 X 80%) = 262,000. So the first time buyer buying for €300,000 will now need a deposit of 38,000 or 12.66%.

For everyone else the new LTV rules say the max mortgage will be restricted to 80%. So Home Movers ect will be restricted to 80%LTV.

Exceptions to the New Central Bank Mortgage Rules

There is always an exception to the rule and in the case of the Central Banks new Mortgage lending rules there are a few exceptions.

1/ Switcher mortgages are exempt. So each mortgage lender has the discretion to lend over and above the new mortgage rules to anyone looking to get a better deal on their existing mortgage.

2/ Mortgage lenders have also been given the discretion to lend to 15% of borrowers over and above the LTV (Loan to Value) limits and to 20% of customers over and above the LTI (Loan to Income) limits. This means they will be able to lend over and above the new rules to 35% of new borrowers.

Many prospective home buyers are really worried about the new central bank mortgage rules and how they will be personally affected and also how the overall property market will be affected.

Will property prices keep rising or will the new mortgage rules cause a property price fall?

It is too early to tell if the new mortgage rules will have any affect on property prices. Personally I do not see the rules having much of an impact on property prices either up or down. The main issue driving prices, in Dublin especially, is the lack of supply of suitable properties for First Time Buyers. With home construction still at an all time low nationwide it would seem that prices are set to continue to increase. However they may now increase at a slower pace due to the new mortgage restrictions.

If you are confused about the new mortgage rules or just want to check your new max mortgage amount then please give us a call or feel free to post a comment below.