As part of its goal to safeguard financial stability and contribute to the long term resilience of the financial system, the Central Bank introduced a series of Mortgage Measures in 2015.
These regulations set ceilings on the amount of money that can be borrowed to buy residential property through loan to value (LTV) and loan to income (LTI) limits.
The mortgage measures are designed to ensure that banks and other credit institutions lend sensibly, house buyers do not over-borrow and excess credit does not build up within the Irish financial system.
First-time buyers are now required to provide a minimum deposit of 10% of the value of a property they are buying. People buying second and subsequent homes need to have a minimum deposit of 20% and those buying a property to let must provide a minimum 30% deposit.
Banks or other credit institutions can make exceptions to these rules. This can only be 5% of the value of their new lending to first time buyers, 20% of the value of new lending to second and subsequent buyers and 10% of the value of new lending to buy to let buyers.
Other rules restrict the amount that can be borrowed to a ceiling of 3.5 times gross income. For example, a couple with a combined income of €100,000 can borrow up to a maximum of €350,000. Once again, exceptions are allowed but only 20% of new lending in total for a bank or credit institution can be above these loan to income limits.
Ireland is not alone in introducing such measures – 16 EU countries have introduced some form of mortgage regulation to help safeguard their national financial systems.