Mortgage Measures - Frequently Asked Questions

The mortgage measures limit the size of mortgage debt to buy residential property. These limits are based on the income of the borrower (loan-to-income limit), and the value of the property (loan-to-value limit). The measures were introduced by the Central Bank of Ireland in 2015 and are a permanent feature of the Irish mortgage market.

Read our explainer to find out more about the limits and allowances.

The mortgage measures aim to ensure sustainable lending standards in the mortgage market. In doing so, the measures look to prevent the emergence of an unsustainable relationship between credit and house prices and ultimately support the resilience of borrowers, lenders and the broader economy.

This is central to the Central Bank’s policy framework and our mandate to serve the public interest by maintaining monetary and financial stability while ensuring that the financial system operates in the best interests of consumers and the wider economy.

In 2021/22 the Central Bank conducted a comprehensive review of the mortgage measures framework to ensure that the measures continue to remain fit for purpose, in light of changes to our financial system and economy since they were first introduced in 2015. The outcome of this review was announced in October 2022.

See our Mortgage Measures Framework Review webpage for further details.

Read our explainer to find out more about the limits and allowances.

Having differentiated limits for FTBs and SSBs has been an important element of the Central Bank’s framework since its introduction. Having different limits for FTBs recognises the different roles played by first-time buyers and second/subsequent buyers in the house-buying cycle.

For example, first-time buyers are generally at an earlier point in the income lifecycle and are more likely to experience income growth during their mortgage, making their loans easier to sustain over time, and less risky for lenders. Second and subsequent buyers, by contrast, benefit from house price growth during their tenure as owners, which can be used during periods of house price growth to purchase more expensive properties.

However, when considering the rationale behind having different limits for FTBs and SSBs, a higher LTI limit for FTBs is a more effective way to differentiate between these borrowers. Given the growth in house prices relative to incomes since the measures were introduced, the LTI has become the clear binding constraint for a majority of borrowers. In addition, as FTBs are on average seven years younger than SSBs in recent years, income growth potential after mortgage origination is higher for FTBs. This greater earning potential allows a higher starting LTI to be sustained without the same risks to future borrower resilience.

A higher LTI limit for first-time buyers provides some support to these borrowers to access the housing market without unduly compromising the effectiveness of the measures.

The costs of the mortgage measures relating to challenges entering the mortgage market are also deemed to be higher for potential FTBs than potential SSBs. The differential treatment is supported by the fact that there is empirical evidence for higher default risk among SSBs than FTBs, for a given level of LTV or LT.

No. While the measures set requirements for lenders, they do not replace responsible lending standards and the application of suitability requirements by lenders. Lenders must continue to be satisfied that mortgages are affordable for each individual borrower for the duration of the life of a loan.

The requirement for a deposit is a crucial element of sustainable lending standards as it provides a buffer against the effects of house price falls, which could push borrowers into negative equity. Negative equity can have a series of adverse impacts on households, relating to capacity to switch mortgage, ability to draw down consumer loans (e.g. car loans), or move home in light of changing personal or financial circumstances. From the lenders’ perspective, losses on mortgages are predominantly experienced when negative equity prevails.

The proportionate allowances within the mortgage measures allow flexibility for lenders to issue mortgages to FTB borrowers at LTVs greater than 90 per cent. Lenders’ own credit policies also play an important role. From an affordability perspective, before providing a mortgage, lenders are required to undertake thorough creditworthiness assessments to ensure a borrower will be able to repay the mortgage. This assessment must take into account the individual circumstances of the borrower. In general, lenders do take account of rental payments when making their affordability assessment as part of regular underwriting process to assess borrowers’ ability to repay a mortgage. In the context of deposit requirements, the limited issuance of LTV allowances above 90 per cent points to lenders having very limited appetite to lend at LTVs of greater than 90 per cent.

An important part of the Central Bank’s mortgage measures framework is that there are two requirements: a deposit requirement (LTV) and an affordability requirement (LTI). These different limits address different elements of mortgage market risks. The LTV limit provides a buffer against the effects of house price falls, which would push borrowers into negative equity and increase the risk of default. The LTI limit, on the other hand, provides a buffer against the effects of future shocks to income or employment.

The rapid growth in rents in recent years reflects an underlying imbalance between housing supply and demand. The most effective way to ensure that rents become more affordable is that more supply of rental properties comes on the market in areas where demand is highest. This would mean more rental property construction in urban areas.

More broadly, a mortgage is the largest liability that most households will take on in their lifetime. It comes with less flexibility than a rental contract, leaving borrowers more exposed to shocks to incomes, house prices and interest rates in the future.

No. The mortgage measures cannot – and do not –target house prices, which are driven by broader factors, many outside the mortgage market. They are designed to promote financial stability by ensuring that banks and other lenders lend money responsibly and people don’t borrow more than they can afford when purchasing a property.

The Central Bank framework specifically allows flexibility by lenders when assessing individual cases. The allowances mean that lenders are able to make decisions based on an individual borrower’s circumstances up to a specific limit. Lenders are still required to assess an individual borrower’s affordability and lend prudently on a case-by-case basis, in line with the requirements of the Consumer Protection Code and other regulations. 

Since the introduction of the measures, between 20 and 30 per cent of all new mortgages in Dublin have tended to be issued with an allowance. This suggests that the flexibility inherent to the measures has been facilitating access to mortgage finance in the capital, where the imbalance between house prices and incomes is higher than the rest of the country.

More broadly, differentiating the limits on a geographical basis may lead to unwanted side effects for the housing market and the operation of the mortgage measures.

The measures have contributed to making sure that those who have purchased properties are better prepared to manage their mortgage payments in the event of a future downturn in the economy.

Householders will be better protected as they will have a deposit in place that will limit the exposure to negative equity. Banks will be better protected as there is a buffer between the loan and the value of the home. Had similar measures been in place during the boom period, the impact of the financial crisis on households and on financial stability would have been reduced.

Since 2015, the measures have worked as intended and have strengthened the resilience of both consumers and lenders. Previous research has concluded that house prices would have been significantly higher relative to incomes in the absence of the measures, and that mortgage credit has not been an important driver of house price developments since 2015. While the objective of the mortgage measures is not to target house prices, this suggests that – in the absence of the mortgage measures – affordability pressures for mortgage borrowers would have been even more acute. While many things have changed since the measures were introduced in 2015, they remain an essential policy framework to safeguard economic and financial stability. The framework review conducted in 2022 reaffirmed the benefits of the measures, through fostering a more sustainable mortgage market.

Yes. Allowances to exceed the LTI limit and LTV limit have been central to the framework of the mortgage measures since their introduction. The allowances acknowledge that higher LTI and LTV mortgages can be appropriate in certain circumstances. For example, an allowance might be appropriate for younger borrowers who are at an early stage in their income lifecycle. The proportion of lending allowed above the limits applies at the level of the borrower type, such that 15 per cent of FTB and SSB lending can take place above the limits.

To find out more about the level of allowances read our explainer.

The allocation of allowances is a matter for individual lenders, based on an evaluation of each specific borrower and lender’s own credit policies. The LTI and LTV limits are in addition to individual banks’ credit policies and are not a substitute for lenders’ responsibilities to assess affordability and lend prudently.

The "carry-over" system will permit, within the specified limits of the measures, lenders who have allowance lending which has not been allocated in a given year to utilise this in the first half of the following year, on the condition that such lending was fully approved in the given year.

Fully approved refers to where a lender has:

• Verified the housing loan applicant borrower’s income, assets, debts and other information relevant to the housing loan application
• Complied with Section 14 of the Credit Reporting Act 2013 
• Applied a full credit risk assessment
• Issued a formal letter of offer to the prospective borrower.

The introduction of the "carry-over" approach will facilitate lenders in carrying over any unused allowance share from 2021 for use in H1 2022, on the provision that those loans were fully approved in 2021.

No. Lenders are still required to assess each loan application on a case-by-case basis. Ultimately, the amount of any loan offered is a matter for individual lenders, but only a proportionate level of mortgages as specified in the mortgage rules are allowed to exceed the LTV and LTI limits.

The mortgage measures apply to mortgages secured on residential property in the State. Equity releases and top-ups on existing mortgages are also covered by the measures.

Mortgages out of scope of the measures are:

• The LTV and LTI limits do not apply to switcher mortgages or mortgages entered into in order to address arrears or pre-arrears.
• The LTI limits apply to mortgages for borrowers in negative equity who are selling their home and wish to obtain a mortgage for a new property. The LTV limits do not apply. However, the usual lending standards of individual banks apply to these borrowers. In the case of joint mortgage applications, if one borrower is under a negative equity loan, the full application is considered to be a negative.
• The LTI limits do not apply to housing loans for non-private dwelling home purposes (i.e. buy–to-let) and to lifetime mortgages.