Mortgage Measures

The mortgage measures are aimed at strengthening the resilience of both borrowers and the banking sector.
The measures set limits on size of mortgages that consumers can borrow through the use of loan-to-value (LTV) and loan-to-income (LTI) limits.
The Central Bank is committed to annually reviewing the calibration of the mortgage measures in the context of wider housing and mortgage market developments, to ensure that they continue to meet their objectives of:
- Increasing the resilience of banks and borrowers to negative economic and financial shocks
- Dampening the pro-cyclicality of credit and house prices so a damaging credit-house price spiral does not emerge.
The 2021 review of the mortgage measures can be found in the Financial Stability Review 2021:II. The Central Bank has decided that the calibration of the mortgage measures will remain unchanged at this time, in light of the ongoing framework review. The framework review is considering the overarching approach to the mortgage measures to ensure that they remain fit for purpose, in view of the evolution of the financial system and economy since the measures were first introduced in 2015. This framework review will conclude in the second half of 2022.
Operational changes to the measures are being made with the introduction of a "carry-over approach" for allowance lending, and amendments clarifying regulated mortgage lenders’ ability to participate in the "First Home" Shared Equity Scheme.
- House price growth has accelerated in recent months, fuelled by the continuing imbalance between supply and demand, which was exacerbated by the COVID-19 shock.
- Structural and cyclical forces are likely to put continued upward pressure on house prices. Survey evidence and updated house price forecasts suggest market participants’ expectations with respect to the degree of near-term house price growth have increased during 2021. Construction cost inflation and the implementation of recent Government housing policy initiatives are also likely to influence house price developments over the near-to-medium term.
- The mortgage market has undergone a robust recovery, with recent mortgage market activity showing that the volume of drawdowns and approvals have more or less returned to pre-pandemic levels.
- There are few signs of a general deterioration in new lending standards that would adversely affect bank and borrower resilience, with the use of allowances for high LTV and LTI lending still remaining below pre-pandemic levels.
- Credit dynamics have not been playing an increased role in explaining recent house price trends.
- The resilience benefits of the mortgage measures were evident in payment break take-up rates during the pandemic. Borrowers with high LTI and LTV at origination exhibited far higher take-up rates of payment breaks in 2020 than those with smaller mortgage burdens.
Overall, the mortgage measures will continue to play an important role in fostering resilience and containing pro-cyclical dynamics in a housing market that will continues to face considerable supply / demand pressures.
Previous Reviews and Analysis
First introduced in February 2015, the mortgage measures are aimed at enhancing the resilience of both borrowers and the banking sector. The following provides previous reviews of the mortgage measures, associated research and Statutory Instruments.
The regulations were also informed by a public consultation issued in 2014. The Central Bank of Ireland published a feedback document providing an overview of responses to the submissions made during the consultation process and the review process undertaken by the Central Bank of Ireland.
For further information see: CP87 Macro-prudential policy for residential lending.
See also: