Conor McGuinness (Waterford, Sinn Fein)
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16. To ask the Minister for Finance if he considers the Central Bank’s mortgage measures are in need of review, particularly the loan-to-value limit deposit requirement given the catch-22 situation many renters find themselves in being unable to save for a deposit due to high rents, which in many cases are far in excess of the mortgage repayments they would expect to pay; and if he will make a statement on the matter. [4189/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Central Bank has statutory responsibility for the regulation of mortgage lending by banks and other regulated entities. This is an important part of its independent mandate to preserve and protect financial stability. In line with this mandate, lenders have to meet regulatory requirements when providing mortgage credit to consumers.

These regulatory requirements include the Central Bank’s macro-prudential residential mortgage lending measures. These measures apply certain loan-to-value and loan-to-income requirements to residential mortgage lending. The measures seek to ensure that sustainable mortgage lending standards are applied to generally support the resilience of borrowers, lenders and the broader economy.

In 2021 and 2022, the Central Bank carried out a comprehensive review of these lending measures to ensure they remained fit for purpose in light of changes to the financial system and the wider economy.

The review led to changes to the lending rules in 2023. In particular, the loan to income limit for first time borrowers and the loan to value limit for second and subsequent borrowers were increased.

The mortgage measures allow a certain flexibility to lenders at their own commercial discretion to issue some mortgages in excess of the thresholds. However, the Central Bank considered that it was still important, from an overall financial stability and sustainable lending perspective, to maintain a borrower down-payment requirement when purchasing a residential property. The rationale for its retention was that it provides a buffer against the risk of negative equity for the borrower and against decline in the capital base of lenders.

In addition there are other important consumer protection requirements in relation to mortgage lending. Lenders are obliged to assess the creditworthiness of prospective borrowers.

That assessment of creditworthiness must be carried out on the basis of information such as the consumer’s income and expenses, including evidence of the borrower’s ability to meet rental payments, and other financial and economic circumstances which is necessary, sufficient and proportionate.

Therefore, in general, lenders do take account of relevant financial information such as rental payments when making their affordability assessment as part of the mortgage underwriting process.

Subject to these regulatory requirements, it remains the responsibility of an individual lender to decide whether or not to provide a loan in any particular case, or how much credit to provide in any particular case. Including the extent to which the lender avails of the allowance to provide a mortgage in excess of either a loan-to-value or loan-to-income threshold.

However, the Consumer Protection Code makes clear that, where a formal application for credit is turned down, lenders are required to clearly outline to the personal consumer the reasons why the credit was not refused and to provide those reasons if requested by the consumer.