The Deputy Governor of the Central Bank has said that the Central Bank's mortgage lending rules have held up well during the pandemic.

Sharon Donnery said the pandemic had been the first significant crisis to test the rules in a time of stress.

She told the News at One that the mortgage lending rules are intended to be a permanent feature of the market and will be reviewed annually, with a major review due next year.

Ms Donnery said that the rules are intended to protect individuals from getting into too much debt and to try and ensure banks do not amplify stresses during a crisis.

She said the number of individual payment breaks sought by mortgage holders during the pandemic were at a much lower level for those who borrowed under the lending rules, compared to those who borrowed before the rules were introduced.

The banks were also much better able to withstand the stresses caused by Covid-19, compared to the financial crisis, Ms Donnery said.

She said "this tells us that in terms of making the system safer overall, the measures are working well".

We need your consent to load this rte-player contentWe use rte-player to manage extra content that can set cookies on your device and collect data about your activity. Please review their details and accept them to load the content.Manage Preferences

The Deputy Governor stressed that the Central Bank is "very alive" to the challenges the measures can have on individuals and on families but added "the answer is not necessarily to take on more debt".

She said that given the supply bottlenecks in the market, providing additional credit to people will just cause prices to rise further and people to become more indebted.

While the rules allow for some exceptions, and for banks to allow individual circumstances to be taken into account, other issues in the market play a role in the affordability of housing, Sharon Donnery said.

These include the debate around the role of renters and the provision of social and affordable housing.

She said that the wider research by the Central Bank shows that supply of the necessary amount of housing has not caught up since the financial crisis and has been further disrupted during the Covid-19 pandemic.

Ms Donnery said that mortgage lending has recovered strongly and many households have saved significant deposits for purchasing homes.

She said that investment in property has increased overall supply and further, that the low interest rate environment is a factor in the wider market too.

Ms Donnery said that mortgage lending has recovered strongly and many households have saved significant deposits for purchasing homes.

She said that investment in property has increased overall supply and further, that the low interest rate environment is a factor in the wider market too.

Earlier, the Central Bank Deputy Governor said the benefits of the mortgage measures were evident over the past year as the resilience built since their introduction helped to protect borrowers and lenders during the Covid-19 crisis.

Ms Donnery made her comments virtually at the Bank of Lithuania's macroprudential policy conference.

Highlighting the important role the measures have played over the past seven years, Ms Donnery said they have two objectives.

The first is to increase the resilience of banks and borrowers to negative economic and financial shocks, and the second is to dampen the pro-cyclicality of credit and house prices so a damaging credit-house price spiral does not re-emerge.

She said the policies have contributed to meeting their objectives as the resilience built up since the introduction of the mortgage measures showed its worth during the Covid pandemic.

House prices entering the pandemic were at lower risk of a cyclical downturn than may have been the case in the absence of the mortgage measures, she said.

Meanwhile, counterfactual exercises suggested house prices may have been up to 25% more expensive had the measures not been introduced.

In addition, borrowers with lower indebtedness levels were less likely to require the support of a payment break, she added.

Ms Donnery said the mortgage measures framework is currently under review and the outcome of the review is expected to be announced in 2022.

The Central Bank also published three Financial Stability Notes today, which illustrate the type of analysis which will inform the overall mortgage measures framework review.

The cost of housing and indebtedness across European and OECD households places Irish housing costs in an international context and reveals that loan to income ratios across the mortgaged population are similar in Ireland to elsewhere in Europe, and have fallen more than most since 2013.

Ms Donnery said this further indicates that borrower resilience has improved since the mortgage measures were put in place.

Meanwhile, Irish house price-to-income ratio has remained close to or below the median level across developed economies in recent years and Ms Donnery acknowledged that this also reflects the global nature of challenges to housing affordability over the last decade.

The Central Bank said its research also shows that new mortgage borrowers have become both older and higher-income since the mortgage measures were put in place.

However, she noted that this development also reflects wider societal and economic changes around demographics, income growth, and the risk appetite of banks since the last crisis.

The Central Bank research also highlights the importance of a policy mix that stimulates additional housing supply through reductions in construction costs, rather than increased price levels resulting from increased debt for borrowers.