Paschal Donohoe (Dublin Central, Fine Gael)
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The Central Bank of Ireland, as part of its independent mandate to preserve and protect financial stability in Ireland, has statutory responsibility for the regulation of mortgage lending by banks and other regulated entities.

In line with the Central Bank’s mandate, the Central Bank introduced macroprudential measures for residential mortgage lending by such institutions in February 2015. The objective of the mortgage measures is to increase the resilience of the banking sector and households and to reduce the risk of credit-house price spirals from developing.

The macroprudential measures apply loan-to-value (LTV) and loan-to-income (LTI) restrictions to residential mortgage lending by financial institutions regulated by the Central Bank. The LTI limit is 3.5 times the borrower’s income. For second and subsequent buyers, the LTV limit is 80% of the value of the residential property (i.e. a deposit of 20% is required from the house purchaser). A mortgage deposit can help households to absorb a certain reduction of house prices before the borrower falls into negative equity.

Allowances to exceed the LTI limit and LTV limit have been central to the framework of the mortgage measures since their introduction. The allowances acknowledge that higher LTI and LTV mortgages can be appropriate in certain circumstances. Mortgage lenders are allowed to issue up to 20 per cent of the value of new mortgage lending to second and subsequent buyers at LTVs above 80 per cent. This could include borrowers in the specific circumstance referenced by the Deputy.

The allocation of allowances is a matter for individual lenders, based on an evaluation of each specific borrower and the lender’s own credit policies. The mortgage measure limits are in addition to individual banks' credit policies and are not a substitute for lenders’ responsibilities to assess affordability and lend prudently.

Ultimately, however, subject to the requirement to comply with the provisions of the macro-prudential mortgage lending rules, the Central Bank Consumer Protection Code and other regulatory requirements, it remains the responsibility of an individual lender to assess the credit worthiness of an individual and to decide whether or not to provide a loan in any particular case, or how much credit to provide in any particular case.