The Central Bank made its announcement yesterday (27 January 2015) on the new rules applying to mortgages. These are effective immediately and are expected to be introduced under legislation in next few weeks. The rules are:
Loan to Value Rule
You may borrow 80% of the value of the property for homes i.e. a 20% deposit is now required.
First Time Buyers can borrow 90% of the value up to a value of €220,000. Anything over this, the 80% limit applies.
Example: For a €350,000 house, a first time buyer needs a deposit of €48,000; €22,000 deposit for the first €220,000 and a €26,000 deposit for remaining €130,000.
15% of all loans given on an annual basis may exceed these limits.
Loan to Income Rule
The mortgage amount is limited to a multiple of 3.5 times salary.
20% of all loans given on an annual basis may exceed these limits.
Buy to Let Rule
You may borrow 70% of the value of the property for rental properties i.e. a 30% deposit is now required.
10% of all loans given on an annual basis may exceed these limits.
The Central Bank reiterated that these measures are being introduced to prevent reckless lending and the banks needing to be bailed out again in the future.
These rules were amended with effect from 1 January 2017. Click here to see the changes.