Central Bank announce new deposit rules for first time buyers

The Central Bank has this afternoon announced significant changes to its rules regarding mortgage lending, in a move that is expected to ease the pressure on first time buyers.

The new rules will see first time buyers eligible to borrow any amount with a deposit of 10 per cent.

Up until now those seeking to buy their first home needed a deposit of 10 per cent to purchase a property worth no more than €220.000, and required a 20 per cent deposit for properties over that amount.

The new rules mean a first time buyer, seeking to secure a loan of €300.000, for example, would need €30.000 deposit.

A statement released by the Central Bank today read: “The ceiling on the loan to value (LTV) ratio for all first time buyers will be set at 90 per cent.

“This is a shift from the current requirement, which puts the ceiling at 90 per cent for loans up to €220,000 but at 80 per cent for the balance of loans above €220,000.

“This means that first time buyers will be able to borrow up to 90 per cent of a value of a home, with a requirement for a 10 per cent minimum deposit.

“The 20 per cent minimum deposit requirement (i.e. maximum LTV ratio of 80 per cent) continues to apply to second and subsequent buyers. 

Central Bank Governor Philip Lane said: “Over the past 18 months, the measures have helped to ensure that those who buy homes are better prepared to manage their mortgage payments in the event of a future downturn in the economy or in the housing market.

“While our review process affirmed the value of the overall framework, some modifications to the measures were suggested by our evidence-based analysis.

“The 3.5 times ceiling on the loan to income ratio remains unchanged.

“The 90 per cent loan to value ratio limit for all first time buyers simplifies the overall framework, with only five per cent of lending permitted above this level.

“The 20 per cent allowance for lending above the 80 per cent loan to value ceiling for second and subsequent buyers is broadly in line with current lending patterns.  

“The loan to value requirements for all other buyers will remain in place. Taken together, these measures constitute a sustainable framework to underpin our financial stability objectives.”

All changes will be effective from January 1, 2017.

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