Eoghan Murphy (Dublin Bay South, Fine Gael) | Oireachtas source

I thank the Deputy for raising the issue and I am aware of his interest and persistence on this matter. I am glad that he acknowledges that the rules are sensible.

The Central Bank's macro-prudential limits on mortgage lending came into effect on 9 February 2015. The policy sets restrictions on the loan-to-value, LTV, and the loan-to-income, LTI, ratios on products that can be offered by mortgage providers. The Central Bank has an independent mandate to promote and protect financial stability and these residential mortgage lending macro-prudential measures were put in place by the Central Bank with the objective of increasing the financial resilience of the banking and household sectors and reducing the risk of bank credit and house price spirals in the future.

There are a number of exemptions allowed for within the Central Bank guidelines - for example, for mortgage switchers or forbearance cases. The banks are at liberty to use these exceptions to the extent they see fit and will likely do so with consideration to their risk appetite, lending policies and overall strategy. The measures provide that residential mortgage loan approvals issued after 9 February 2015 will be subject to specified LTV and LTI restrictions. Any mortgage loans sanctioned prior to that date are not affected by the new rules even where the mortgage is drawn down after 9 February.

Subject to certain exceptions, the restrictions that apply to mortgage lending are: a maximum LTV mortgage of 80% of the value of a principal dwelling house for non-first-time buyers; a maximum mortgage LTV of 90% for a property valued up to €220,000 for first-time buyers, subject to an 80% LTV on any excess value above that amount; a limit of 70% LTV on buy-to-let mortgages; and an LTI limitation of three and a half times a gross annual income for loans only.

Certain other types of primary home residential lending fall outside the scope of the new rules. The LTV and LTI limits do not apply to the refinancing of housing loans, switcher mortgages or housing loans entered into in order to address arrears or pre-arrears. Housing loans for borrowers in negative equity who wish to obtain a mortgage for a new property are not in the scope of the LTV limits. However, lenders can exceed the above LTV and LTI thresholds in respect of a certain limited proportion of the overall amount of residential lending, as the Deputy has pointed out. For primary home mortgage lending, up to 15% of new lending as drawn down can exceed the LTV threshold limits in an annual period and up to 20% of new lending can exceed the LTI threshold.

The decision of a bank to utilise some or all of these exemption thresholds or not is a commercial matter for individual banks, subject to compliance with consumer protection rules and having assessed loan applications on a case-by-case basis. The banks, therefore, are at liberty to use these exemption discretions as they see fit and will likely do so with consideration to their risk appetite, lending policies and overall strategy. The macro-prudential limits on mortgage lending are designed, implemented and monitored by the Central Bank in its role as regulator of the Irish banking sector, and therefore fall outside the remit of the Minister for Finance. Lenders are required to make regulatory returns to the Central Bank on the lending they make which falls within the scope of the macro prudential regulations. These returns are provided on a six-monthly basis.

The Central Bank has not provided information on such regulatory returns on an individual institution basis; neither has it provided, at least so far, aggregated data on this matter for public information and there is no regulatory requirement for any bank to publicly disclose the value of approved mortgages that are exceptions to the macro-prudential limits. However, in the context of the upcoming review of the macro-prudential rules, officials in the Department will write to the Central Bank to suggest that it would be helpful if the Central Bank could make available aggregated data on mortgage lending since the macro-prudential rules came into operation. This data, if available, would assist respondents in making evidence-based submissions to the Central Bank's consultation process.

The Minister for Finance's role, as set out in the relationship framework agreements with the banks in which the State is a shareholder, does not involve him in the relationship between the banks and their regulator. It would therefore be inappropriate, and beyond his remit, for him to direct an individual credit institution to disclose the information sought by the Deputy. The Central Bank has indicated that, while the general framework of mortgage rules is intended to be a permanent feature, arising from this forthcoming review the calibration of these rules can be tightened, loosened or left unchanged in response to its analysis of the operation of these rules from inception through summer 2016. However, it has cautioned that, given the value of a stable rules-based system, any changes to the existing measures will require a high evidence threshold.

As laid out in the programme for Government, the Department of Finance will work with the Central Bank in the context of the review of the mortgage lending limits and, as indicated, officials will also engage with the Central Bank on the availability of data to assist the public consultation process. On a more general point, despite concerns that the macro-prudential measures would impact on the level of lending in 2015, data indicate that new residential mortgage lending amounted to almost €4.9 billion in 2015. This represented an increase of 26% on the 2014 new residential mortgage lending figure of €3.9 billion.

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