The Central Bank has decided not to make any changes to mortgage lending rules here that limit how much people can borrow from banks in order to fund house purchases. 

Following a review, the regulator has concluded that the measures continue to meet their objectives of strengthening bank and borrower resilience.

It also said the measures reduce the likelihood and impact of a credit-house price spiral emerging. 

Without the restrictions, the Central Bank estimates that house prices this year would been 15% to 25% higher than they currently are. 

"The mortgage measures are working and because they are working we don't propose any changes to them," said Gabriel Makhlouf, Governor of the Central Bank of Ireland

"If the measures had not been introduced in 2015, our models suggest that both the level of house prices and the proportion of highly indebted mortgage borrowers would likely have been significantly higher in 2019 than we see, all else being equal."

The measures were introduced in 2015 in order to strengthen the resilience of borrowers and lenders and to reduce the likelihood of an unsustainable credit fuelled housing boom. 

The Central Bank claims the rules are not meant to target house prices. 


The rules include a borrowing limit of three and half times gross income, while borrowers must have a particular level of deposit set aside dependent on whether they are buying a house for the first or second time or as an investment. 

The decision not to change the restrictions is likely to come as a disappointment to some would-be-borrowers who had been hoping for some relaxation in order to enable them to borrow funds they require to make a purchase. 

Some in the banking industry and in politics are also likely to be unhappy.

Earlier this year, AIB chief executive Colin Hunt said the rules should not be set in stone. 

Taoiseach Leo Varadkar also expressed hope that there would be some changes in order to help those renting, while also recognising the independence of the Central Bank. 

In its 2019 review, the Central Bank said the measures have been effective in strengthening borrower and lender resilience and in limiting the potential for an adverse credit-house price spiral to emerge. 

Without them, both house price levels and the proportion of highly indebted mortgage borrowers would likely have been significantly higher this year, it said. 

It added that while the aim of the measures is not to target house prices, analysis suggests that without them, affordability pressures for mortgage borrowers would have been even more acute.

The bank claimed a greater proportion of households are now borrowing at or close to the maximum available to them, because the measures are becoming more "binding" as prices increase.

"This is to be expected, it shows our measures are effective and are working," Mr Makhlouf said.

"They will protect long term mortgage affordability in a market with upward price pressures following a prolonged period of uncertainty."

It also maintained that supply restrictions are what is continuing to fuel house price growth.

The regulator said they did look at whether it would be possible to tweak the exemption system, but decided against it.

"We did look at a number of options for managing allowances," the Governor said.

"In some cases alternatives would have ended up with a less operationally flexible regime than is currently in place. In short we have not found a way that is more flexible than the existing regime, while at the same time meeting the objectives of the measures."


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In its latest Financial Stability Review, the Central Bank also says that the main risks facing the economy here continue to stem from external developments, such as falling global interest rates and Brexit,.

It also pointed to a gradual domestic build up of cyclical risks in the economy as it comes close to capacity. 

The Central Bank said the banking system is now better able to absorb shocks, but cautioned that further progress is needed in key areas such as non-performing loan reduction. 

The review concludes that the continuing risk of a disorderly Brexit and the macroeconomic shock that could follow would be sizeable, with more severe effects in certain regions and sectors. 

It also identifies the growth in leveraged lending markets internationally, through the growth in the use of instruments such as collateralised loan obligations. 

Changes in the international trading and tax environment could also impact Ireland as a small open economy that is highly integrated into global supply chains, it cautioned. 

The possible re-emergence of sovereign debt concerns in the euro area is also a worry, the bank claims, with sovereign debt levels in some parts of the euro zone remaining high. 

If a disorderly Brexit does not arise, then the prospects for the Irish economy remain favourable, it said, but the economy is also near capacity and credit growth is strengthening.

On sovereign debt, the Central Bank found ratios of debt to the GNI* measurement of the size of the economy have improved in recent years on back of strong growth, but a range of possible shocks have the potential to impact that.

The bank also points to possible risks in the non-bank financial sector.

Reacting to the decision not to change the mortgage measures, the Institute of Professional Auctioneers & Valuers (IPAV), said while it wasn't a surprise, the situation does leave the less well-off who could well afford to make mortgage repayments in a vulnerable position.

"While those on high end salaries can afford to buy, those on average wages are in real difficulty," said Pat Davitt, IPAV's Chief Executive.

He said overall the Central Bank mortgage rules play an important role.

"However, they do need some tweaking in our view. They are having an impact on first-time buyers and those with fewer family resources to help with a mortgage," he said.

The Banking and Payments Federation of Ireland said it recognises the importance of the rules in ensuring the stability of the banking system and in protecting borrowers from the risk of over indebtedness.