On the 19th October, the Central Bank of Ireland, after a comprehensive review of the mortgage measures framework, announced that it would be changing its mortgage measures. In simple terms, they decided to change some of the measures all mortgage lenders must follow in Ireland when lending to customers.
To give some context, these are the different categories for mortgages before the Central Bank changes were announced –
First Time Buyers:
First Time Buyers could borrow 3.5 times income and up to 90% Loan to Value (depending on their income). They were required to have 10% deposit (minimum).
Second Subsequent Buyers:
Second Subsequent Buyers could borrow 3.5 times income and up to 80% Loan to Value (depending on their income). They were required to have 20% deposit (minimum).
Previously, people applying for a mortgage were only able to borrow up to 3.5 times their income. In the current climate of increased house prices, First Time Buyers were finding it very challenging to find a Home within this criteria. For example, if a couple are on a combined salary of €80,000 looking to borrow the full 90% Loan to value, the max they could borrow was €280,000. This means the most they could potentially buy a house for would be €310,000 (depending on their level of deposit). In today’s world of house buying €310,000 might not get you a lot of bang for your buck!
Changes by Central Bank effective since 1st January 2023
- The Central Bank have now changed this to 4 times your income. Using the above example, this increases the amount they could now borrow to €320,000 and potential house price of €355,000. This is a lot more realistic and helpful for First Time Buyers.
- Another change made was the definition of a First Time Buyer. Now if you are recently divorced/separated or have undergone bankruptcy or insolvency and are looking to buy a house on your own, you won’t be penalised by having to now come up with a 20% deposit to buy a house vs a 10% deposit when you bought your first home. You will be treated as a First Time Buyer. You can now borrow up to 90% with only a 10% deposit required. This is a really positive change for people in these difficult situations. The difference of coming up with a 10% deposit is much more manageable than a 20% deposit.
- The Central Bank have also changed the Loan to Value for Second Subsequent Buyers. It was to a max of 80% (i.e., 80% of the cost of the house). They have now increased this to 90% Loan to Value. This is another positive step taken to help anybody looking to trade up their home
For guidance on the new changes and what it might mean for you getting a mortgage:
Call 0818 910800 or email firstname.lastname@example.org