The Central Bank have proposed mortgage restrictions for residential mortgage lending in an attempt to reduce the risk of another property market bubble. It is expected the restrictions will be introduced in January 2015.

Proposed Restrictions:

1. Loan to Value (LTV) Cap

a. Maximum borrowing of 80% of the house value i.e. 20% deposit required. b. There is an allowance where 15% of the bank’s lending can be above the 80% LTV limit. c. The LTV cap would apply to any equity release or mortgage top-ups. d. Exemptions: i. Switcher mortgages with no increase in the principle amount ii. Mortgages in arrears iii. Negative equity mortgages

2. Multiple of salary

a. Borrowers will be restricted to borrowing 3.5 times of their gross annual income. b. There is an allowance where 20% of the bank’s lending cab be above the 3.5 times limit. c. Exemptions: i. Buy to Lets ii. Switcher mortgages with no increase in principle iii. Mortgages in arrears

3. Buy to Let (BTL)

a. Maximum borrowing of 70% of the value of the property i.e. 30% deposit required. b. There is an allowance where 10% of the bank’s lending can be above the 70% LTV limit. c. As there will be rental income for BTL's, the multiple of salary restriction does not apply.

4. Negative Equity Mortgages

a. The LTV restrictions have been exempted for negative equity mortgages. b. The 80% LTV limit will still apply to the new property, before the residual debt is applied.

5. Items to Note:

a. These proposals are open to consultation up to 8 Dec 2014. b. The Central Bank will not allowed attempts to circumvent the regulations such as offering secondary mortgages to part finance the deposit. c. Restriction will not apply to mortgage offer already made or committed.

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