Are banks side-stepping Central Bank lending rules with offers?

Are banks side-stepping Central Bank lending rules with offers?

We’re less than a month into the New Year and already two of the major lenders have unveiled new products to help people get a mortgage.

Both Bank of Ireland and Permanent TSB have been thinking outside the box in the last few weeks to release new initiatives encouraged at helping people onto the property ladder.

In both cases there is 2% cashback while in the case of Bank of Ireland there is major incentives for first-time buyers to save there.

Why are the banks being so generous? Because of the Central Bank lending rules, of course.

Introduced last February, the true effects of the Central Bank rules have only been felt in recent months as people, particularly in urban areas, struggle to save enough of a deposit to buy a home. Things haven’t been made easier by the fact that people are now limited to borrowing just 3.5 times their incomes and while the Central Bank would argue this makes economic and financial sense, for some the review promised by new governor Philip Lane in the coming months cannot come quick enough.

Just this week estate agents Douglas Newman Good (DNG) called for an adjustment of the mortgage lending rules.

DNG said it was in favour of the rules, but they should be altered to allow first-time buyers to borrow up to €300,000 without having to put together a larger deposit than 10pc.

At present new borrowers can have a 10pc deposit for amounts up to €220,000. For borrowings over that they need a 20pc deposit.

Brokers claim that up to 12,000 potential first-time buyers are stuck in “rent jail” as the limits mean they are unable to qualify for a mortgage.

DNG also wants a change in the rules to allow new buyers to qualify for a mortgage amount based on four times their income, and not 3.5 times.

At the moment a first-time buyer couple borrowing €300,000 would need a deposit of €38,000 and a combined income of at least €86,000.

  • Do you agree with the DNG proposals?
  • Are current bank offers bending the rules and will they have to be looked at by the Central Bank?
  • Is the impending review of the rules later this year putting you off buying temporarily?

Have your say below…

There are 5 comments for this article
  1. Jac at 8:41 am

    The Bank generosity is certainly a trap. Think about it the most bullish of the banks are now offering a package to help first time buyer – people should read between the lines- they are wolf in sheep skin.
    The benefits of relaxing the rules can only acrrue to the banks and the Estate agents.

  2. Stephen at 12:11 am

    The rules set by the Central Bank are correct and are, in fact unwittingly, helping potential house purchasers to take stock of their financial capabilities before taking the plunge into the unknown. It is better to have secure rented accommodation than having a mortgage millstone.

  3. Tom Hughes at 9:21 pm

    Just this week estate agents Douglas Newman Good (DNG) called for an adjustment of the mortgage lending rules and the banks as its hitting their profits . There is a lot of hype in the housing market now like in the 2000 “s . It was not real estate agents that loss money in the years after 2007, it was working class people who paid over the market price for houses., Some families losing their homes to the banks ,. . The winners as always will be Banks & real estate agents . , There is a reason why these people love to drive the house market prices up more profit . There is monetary gain for them , it also great to see banks helping people buy homes .Then on the other hand the banks are attempingt to repossess 7,000-plus homes .. .The largest volume of house being repossessed is in Dublin .. 1,420, houses that were for repossession, was lodged in Dublin Circuit Court, 2015 march 2015
    Mortgage holders’ spokesman warns that repossessions will reach 25,000 this year 2015 .
    Then there are people who are in long-term mortgage arrears all due to false market hype from Banks and real estate agents . Rising house prices are the main reason why young people cant buy houses no other reason. Basically our children will never be able to afford to buy a house , if houses prices are rising faster than cost of living pay rises . , The only people who gain from rising house prices are is investors , Banks & real estate agents . For most people the house they buy is their home .It matter little if prices go up as they are going to rear a family .Who so you think have got it right the Banks & real estate agents or the government .

  4. Hannah at 5:59 pm

    Yes , this will put alot of people off buying a home until the rules have been reviewed. Also , the 2nd time borrowers should not be forgotten as they are the people keeping the banks afloat for the last number of years!

  5. Dermo at 5:58 pm

    Rules are there for a good reason. This is like the late 90s all-over, with people saying “but I am paying the equivalent of a mortgage in rent, how can the banks say that I cant afford it? “, but the difference is that if you can’t pay your rent rectifying the problem is much simpler for you. The problem is supply. The focus shouldn’t be on affordability of the existing supply… We just don’t learn.

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