Banks need to change the way they implement the Central Bank’s mortgage lending rules

Banks need to change the way they implement the Central Bank’s mortgage lending rules

Banks need to change the way they implement the Central Bank’s mortgage lending rules

  • Submissions and Policy

The Society of Chartered Surveyors Ireland has said that while it agrees with the Central Bank’s policy of continuing to control mortgage borrowing limits, it believes the way the banks implement the policy needs to be changed.

Speaking at the SCSI’s national conference in Kilkenny, the Society’s Director General, Áine Myler, said without such changes, calendar imbalances for mortgage exemptions – which we have experienced this year – would recur in 2019.

“We recognise that the Central Bank’s macro-prudential rules are an important tool to prevent an overheating market which in turn keeps house prices in line with general affordability. The benefits of the lending rules are clear to see, preventing a return to previous unsustainable house price inflation rates in the boom years, the effects of which are still being felt today.”

“However, we are concerned that the management of exemption mortgage supply is skewing market values and distorting demand across a calendar year, which is creating price spikes during periods when credit is available and almost stopping market activity when it’s not.”

“Many of our estate agency members have reported a significant reduction in sales in Q4 this year, despite the number of qualified buyers who simply cannot access mortgage funds until Q1 2019. This pent-up demand will ensure lengthy queues when the banks open for mortgage-exemption business again in January, creating increased competition in an already squeezed market, but only until exemptions run out again.”

Exemptions to the mortgage thresholds apply where 20% of new lending to First Time Buyers is allowed above the 3.5 limit and 10% of non-FTB new lending allowed above the 3.5 limit.

Following a review, the Central Bank announced earlier this week that it would be leaving its restrictions on mortgage borrowing unchanged.

“The challenge continues to be a housing supply shortage, but with developers now experiencing real cash-flow challenges due to the slowdown in mortgage credit, there is a real concern that activity will switch out of much needed housing supply and into commercial opportunities” Ms Myler concluded.

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