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DUBLIN, Dec 4 (Reuters) - Ireland's central bank will leave
its mortgage-lending limits unchanged for the second straight
year in 2020, saying on Wednesday that the measures have been
effective in keeping house prices from climbing significantly
higher.
The central bank introduced limits in 2015 capping how much
banks can lend for the purchase of a home relative to its value
and the borrowers' income, in a bid to prevent any repeat of the
excessive lending that devastated the economy a decade ago.
Some banks had hoped the regulator would ease the rules in
its annual review. The central bank did announce that it would
not force local lenders to hold more capital under two buffers
it levies on them - the countercyclical capital buffer (CCyB)
and Other Systemically Important Institutions (O-SIIs).
Under the O-SIIs, banks identified as systemically important
to the domestic economy because of their size and market share
must hold additional capital. Barclays and Bank of
America were designated as O-SIIs for the first time on
Wednesday after they moved significant operations to Ireland as
a result of Brexit.
The bank's Irish subsidiaries will have to set aside 0.75%
of risk-weighted assets. UniCredit and Depfa Bank's Irish units
are no longer designated as O-SIIs, the central bank said.
On the mortgage rules, research from the bank suggested that
without the rules the average price of a house might have been
15% to 25% higher at the end of March.
Having shot up from 2013 to 2018 following a property crash,
annual price growth around the country slowed to 1.1% in
September, the lowest rate in more than six years, broadly in
line with the rate of inflation in the economy, with prices 1.3%
lower in Dublin.
While house prices are 17% below the unsustainable 2007
peak, rents long overshot that mark as housing supply struggled
to get going, making it hard for prospective buyers to meet the
central bank's deposit demands.
Under the rules, mortgages are subject to an 80%
loan-to-value (LTV) limit for those buying for the second time.
First-time buyers can borrow 90% of the cost of a home.
A loan to income (LTI) limit restricts the amount of money a
prospective buyer can borrow to a maximum of 3.5 times gross
income, so a couple with a combined income of 100,000 euros can
borrow up to a maximum of 350,000 euros.
Banks can also make a limited amount of exceptions.
(Reporting by Padraic Halpin, editing by Larry King)
