Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

The Central Bank of Ireland, in line with its mandate to safeguard financial stability, has put in place new macro-prudential measures for residential mortgage lending effective from last February. These measures apply proportionate loan-to-value and loan-to-income limits to mortgage lending by regulated financial service providers in the Irish market. The key objective of these measures is to increase the resilience of the banking and household sectors to the property market and to reduce the risk of bank credit and house price spirals from developing in the future. This is of particular significance for Ireland given that mortgage lending constitutes a large part of overall bank lending.

In its submission to the public consultation process undertaken by the Central Bank on its proposals last year, my Department recognised that there was a sound rationale for the introduction of macro-prudential measures in Ireland but also indicated that it would be appropriate to keep the particular measures as adopted under review from time to time. Certain other issues such as the particular position of first-time buyers were also referenced. While the Central Bank is independent in the setting of such macro prudential measures, these points were recognised by the bank. As the Deputy will be aware, the Central Bank allowed a higher loan to value threshold of 90% for first-time buyers of properties valued up to €220,000 and it also indicated that it would monitor the impact of the implemented measures on an ongoing basis, in particular with regard to achieving the stated objectives of the measures and monitoring any unintended consequences.

At official level, my Department and the Central Bank have a close working relationship on all areas of mutual interest, including that of macro-prudential policy. In addition, I maintained close contact with the outgoing Governor and I look forward to also liaising closely with the incoming Governor. I fully respect the independence of the Central Bank to set macro-prudential policy in the best interest of overall financial stability. The Central Bank has indicated that it is actively monitoring the impact of the new measures on an ongoing basis.

See this speech in context