The Central Bank have announced an amendment to the mortgage restrictions.

Up To 90% For First-time Buyers

First-time buyers will be able to borrow 90% up to a value of €220,000. Above this value the 80% limit will apply. The new rules were announced on Tuesday 27 January 2015 and are effective immediately. An example of the deposit required is as follows:

Up To 80% For Non First-time Buyers

Non first-time buyers will generally be restricted to borrowing 80% of the property value as the proposed allowances put forward in November 2014 will be significantly tightened. Buy to let investors will be limited to a maximum borrowing of 70% of the value of the property i.e. 30% deposit required.

Effective Immediately

Plans to phase in the new rules have been abandoned. The Central Bank said up to 15% of loans could breach the new limits, offering some flexibility to lenders and borrowers. Housing loans for borrowers who are in negative equity and who are obtaining a mortgage for a new property are not subject to the LTV limits and will be assessed separately.

Not To Exceed 3.5 Times Gross Annual Income

The rules will also mean that people buying homes will face a limit that loans should not exceed 3.5 times gross annual income. Some exceptions will be allowed on this including switcher mortgages and mortgages in arrears.  Central Bank governor Patrick Honohan said the measures would reduce financial vulnerabilities for borrowers and lenders. Minister for Finance Michael Noonan said the revised proposal will provide certainty to borrowers and ensure that banks continue to engage in prudent lending practices.

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