Central Bank relaxes its borrowing rules

The Central Bank has relaxed its borrowing rules for some borrowers, slightly. In 2015, they introduced strict borrowing rules as a result of the loose lending that went on during the Celtic Tiger that resulted in many people having unservicable debt.

Loan to Income limit increased for first time buyers

First time buyers can now borrow up to four times their salary instead of 3.5 times salary. For couples buying, this limit is combined salaries.

If you are a second time buyer, the current limit of 3.5 times salary still applies.

Loan to value limit extended to second time buyers

Second time buyers can now avail of just needing a 10% deposit. Previously this was restricted to first time buyers with second time buyers needing a 20% deposit. Buy to let buyers still need a 30% deposit.

Expanding definition of first time buyer

The definition of a first time buyer was very strict with no exceptions. The Central Bank have loosened the definition a bit.

Now, if you are formally separated or divorced and no longer have a financial interest in your former home, you will qualify as a first time buyer. Also, if you have gone through bankruptcy or insolvency and lost your home, you will qualify as a first time buyer.

Reduction to exceptions

The Central Bank allowed lenders to provide exceptions to the loan of income limits for up to 20% of their loans per annum. This has now been reduced to 15%.

They have also reduced the loan to value exceptions from 20% to 15% of the loan book per year. But with the deposit required for second time buyers reduced to 10%, this should not have any impact as it will be rare that a bank will lend more than 90% of the value of the property.

These changes come in from January 2023.


Steven Barrett

24 October 2022