Written answers

Wednesday, 5 February 2014

Department of Finance

Mortgage Repayments Issues

Photo of Róisín ShortallRóisín Shortall (Dublin North West, Independent)
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54. To ask the Minister for Finance if his Department or the Central Bank of Ireland sets down guidelines for financial institutions in respect of the level of home mortgage which is regarded as sustainable, relative to the applicant's income, as was the practice prior to the housing boom. [5859/14]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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The Central Bank of Ireland  (CBI) has advised me that Chapter 5 of its Consumer Protection Code contains provisions relating to assessing suitability and affordability of credit, including for example, Provision 5.9 which provides that lenders must carry out an assessment of affordability to ascertain the personal consumer's likely ability to repay the debt over the duration of the agreement.  The affordability assessment must include, inter alia, a test on the basis of a 2% interest rate increase, at a minimum, above the interest rate offered to the personal consumer. The CBI has also published internal sustainability guidelines in June 2013 (updated in Sept 2013) which sets out important factors to consider when assessing if modifications proposed by a lender are sustainable solutions for mortgages arrears cases. Included with the guidelines the CBI has set out its expectations in relation to the assessment of borrower affordability of sustainable solutions. Affordability needs to be based on both their current and prospective future servicing capacity for all borrowings. According to the guidance, assumed prospective future increases in the debt servicing ability of the borrower must be credible and conservative.

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