Central Bank’s mortgage measures remain unchanged following review

• The mortgage measures, as part of the wider macroprudential framework, are achieving the twin objectives of maintaining financial stability and protecting consumers.
• The measures including the loan to income (LTI) and loan to value (LTV) limits remain unchanged.
• Pace of growth in new mortgage lending remains strong but the volume of mortgage lending remains below the levels associated with a fully-functioning housing market.

The annual review of the residential mortgage measures has been published by the Central Bank of Ireland. The review is based on detailed analysis of mortgage lending data in the context of wider housing market developments.

The review evaluated the systemic risk related to the mortgage and housing markets. The analysis confirms that the mortgage measures as currently calibrated are achieving the objectives of maintaining financial stability and protecting consumers.

While the pace of growth in new mortgage lending remains strong, there is scope for further sustainable increases in mortgage activity. The review finds that new mortgage lending does not appear to be the most prominent driving factor in house price developments. Increases in housing supply and turnover should contribute to further moderation in price growth.

Outlining the details of the review, Governor Philip R. Lane said: “The mortgage measures support sustainable mortgage lending in the wider housing market, thereby contributing to financial stability and protecting borrowers from excessive debt. Our review shows that, while the pace of growth in the new mortgage lending is strong, there has been little change in average LTVs and LTIs and no sign of a generalised deterioration in lending standards. On the basis of these findings, no change is required to the current framework.

“While the level of house prices and rents, particularly in urban areas, pose serious affordability concerns, a sustained and substantial expansion in housing supply is the fundamental solution:  a fully functioning and sustainable housing market is not achieved by tolerating imprudent lending standards by banks or excessive borrowing by households.

“In combination with the countercyclical capital buffer that we activated in July, the mortgage measures are crucially important in ensuring that our macroprudential stance is appropriately prudent: the aim is that a more resilient financial system will be better placed to absorb the impact of future downturns.”

The detailed report published today sets out the analysis underpinning the outcome of the review.

The Central Bank will continue to monitor developments as part of the annual review of the mortgage measures.