Bernard Durkan (Kildare North, Fine Gael)
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Question 86: To ask the Minister for Finance the likely criteria to be applied in the future in respect of stress testing of mortgage applicants with particular reference to the need to have due regard for the established principle of a repayment capacity of approximately two and a half times the income of the borrower; the way it might be expected that this part of the mortgage market might be funded in future given the experience of the past ten years; and if he will make a statement on the matter. [10273/12]

Michael Noonan (Limerick City, Fine Gael)
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The Central Bank has in place a Consumer Protection Code (the Code). This Code applies to all financial institutions regulated by the Central Bank (regulated entities). If a regulated entity is selling a financial product, including a mortgage, to a person who is a "personal consumer" for the purposes of the Code, then the regulated entity may only sell a mortgage product that is suitable for the consumer based on the information that has been supplied by the consumer.

Provision 5.9 of the Code requires that prior to offering, recommending, arranging or providing a credit product to a personal consumer, a lender must carry out an assessment of affordability to ascertain the consumer's likely ability to repay the debt, over the duration of the agreement. In the case of all mortgage products provided to personal consumers, the results of a test on the personal consumer's ability to repay the instalments, over the duration of the mortgage agreement, on the basis of a 2% interest rate increase, at a minimum, above the interest rate offered to the personal consumer must be ascertained. This test does not apply to mortgages where the interest rate is fixed for a period of five years or more.

In addition, provision 5.13 requires that a regulated entity must take account of the affordability assessment when deciding whether a personal consumer is likely to be able to repay the debt for that amount and duration in the manner required under the credit agreement. I expect that the conditions set out in the Code will continue in operation for the provision of mortgages over the coming period. A copy of the Central Bank's Consumer Protection Code is available on the Central Bank's website www.CentralBank.ie