There is no evidence of the Central Bank’s mortgage rules impacting on first-time buyers and there should be no “fundamental changes” to the limits, according to consumer advocate Brendan Burgess.
Mr Burgess’ comments come as the deadline for submissions to the Central Bank over its review of mortgage limits ends today.
The Central Bank announced in April it was inviting public submissions on its review of mortgage lending rules.
He said the limits are “appropriate and the fact that the lenders are allowed to make exceptions in up to 15% of cases has worked very well.
“Allowing a return to reckless borrowing is not in the interests of consumers,” he added.
Mr Burgess, who founded the Askaboutmoney consumer website, claims it would push up house prices and consequently the size of people’s mortgages.
A survey from the website among first-time buyers found 42 cases where the potential borrower encountered issues getting a mortgage, however, none of these problems were as a result of the Central Bank’s rules.
According to Mr Burgess, the main causes were instead bad credit records and employment status.
Meanwhile, the website’s study also found that of the 29 trader-uppers who reported problems, only two were due to the requirement to have a 20% deposit.
“And it’s likely that their lenders made an exception for these two borrowers. The most common cause of problems trading up was the difficulty in selling their existing home,” Mr Burgess said.
In his submission to the Central Bank, the Askaboutmoney founder calls for “just some fine-tuning to the limits”, including making it easier for people “trapped in starter homes to trade up”.
In addition, he suggests changing this rule to require those trading up to have 20% of the increased value of the house, rather than 20% of the price of the new house.
PIBA warning over excessive mortgage rules
90% of financial brokers believe that both the deposit rule and income limit under the Central Bank mortgage lending restrictions are too onerous, according to financial broker representative group PIBA.
In its submission to the Central Bank, PIBA which represents almost 900 member firms, says the rules raise issues of equality of opportunity and ability to plan financial futures.
It also warns of the dangers of over regulation saying: “If our country goes overboard in attempting to eliminate all risk there is a grave danger that in doing so it will also eliminate opportunity for individuals and families to grow their personal wealth.”
PIBA is calling for the 90% loan-to-value rate applying to first-time buyers up to €220,000 to be extended to €300,000.
Central Bank Governor Philip Lane said in April that while the general framework of the rules is intended to be a permanent feature, the "calibration of these rules can be tightened, loosened or left unchanged".
Under the current rules, banks can only lend up to a maximum of 80% of a property’s value for most owner-occupiers.
However, they can lend up to 90% of the value of the home to first-time buyers, up to a limit of €220,000.
This means first-time buyers need a 10% deposit for the first €220,000 of their property's cost and 20% of whatever is above this limit.
For buy-to-let mortgages the figure is 70%.
