Revised mortgage measures – a six-month snapshot

Mortgage-measuresEconomists at the Central Bank of Ireland have published new research on the Irish mortgage market following the introduction of revised mortgage measures earlier this year.

In an Economic Letter titled: “Macroprudential Measures and Irish Mortgage Lending: Insights from H1 2017” Central Bank of Ireland economists Christina Kinghan, Paul Lyons and Yvonne McCarthy provide an overview of mortgages issued in the first six months of 2017 compared to the same period in 2016.

The research provides a snapshot of the residential mortgage market since the Central Bank introduced revised mortgage measures on 1 January 2017.

The revised measures cap the mortgages of first time buyers (FTB) to 3.5 times annual income, known as the loan-to-income (LTI) ratio.

FTBs are also subject to a separate loan-to-value (LTV) ratio of 90%, which requires a deposit of at least 10% of the purchase price of their home.

This compares to the original measures announced in 2015 where FTBs were subject to the same 3.5 LTI ratio but with an LTV restriction, which required a deposit of 10% on the first €220,000 of the property price, and 20% on the excess.

No changes were made to mortgage measures affecting second and subsequent buyers (SSBs) who remain subject to an LTI ratio of 3.5 and an LTV limit of 80%.

Mortgage lending in 2017

The research found that overall mortgage lending totalled €3.05bn in the first half of 2017 – a 33% increase year-on-year.  

In relation to different groups of borrowers, the average FTB who drew down a mortgage in the first half of 2017 had a statistically significant larger LTI and LTV compared to FTBs in the first half of 2016.

SSBs who drew down mortgages in the first half of 2017 had an average LTI and LTV that was only slightly above the levels of a year earlier.

For both FTBs and SSBs the research finds that the average loan size and property price in the first half of 2017 was larger than in the first half of 2016 and this difference was statistically significant.


The research also provides insights into the characteristics of borrowers who were given allowances to the LTI and LTV limits.

Under the revised measures, lenders can grant LTV allowances to 5% of FTBs and 20% of SSBs.

Meanwhile 20% of new residential lending is allowed above the 3.5 LTI ratio.

In relation to the LTV restriction, only 30 loans issued to FTBs were granted an allowance compared to 884 allowances issued to SSBs.

Of SSBs with an LTV allowance, youth and relationship status appeared to be a factor, with borrowers more likely to be couples and be on average age three years younger than those without an allowance.

FTBs with an LTI allowance had an average LTI of 3.9 compared to 2.8 of FTBs without an allowance.

FTBs with an allowance were more likely to be younger, single and had an approximately €2,000 lower average income than those without an allowance.

SSBs with an LTI allowance had an average age of 38, compared to an average age of 41 for those without, while they had an average income that was approximately €14,000 lower than those without an allowance.

Some SSBs and FTBs had allowances to exceed both the LTV and LTI limits, but these “are small in number”.

While the research provides a useful snapshot into changes in the Irish mortgage market after the revised mortgage measures, the report’s authors highlight the short timeframe covered by the data.

“Given that this represents only one period of lending under the amended Regulations, caution is warranted in interpreting the results,” they wrote.

Note: The views presented in Economic Letters are those of the author(s) alone and do not necessarily represent the official views of the Central Bank of Ireland.

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