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New Central Bank Mortgage Lending Rules

New Central Bank Mortgage Lending Rules

New Central Bank

Mortgage Lending Rules

The Central Bank has made changes to lending rules which are designed to ease the affordability issues which currently affect movers and first-time buyers. Although these lending rules are reviewed every year, it’s the first time since 2015 the Central Bank has intervened with such changes, and they come into effect in January. But how exactly might this impact future borrowers?

Let’s take a look at the new Central Bank lending rules.

Balancing Financial

Resilience and Affordability

Mortgage lending rules are set by the Central Bank to help regulate the health of the property market, while ensuring borrowers can sustain their monthly repayments over time. One of the ways in which they do this is by setting limits on the amount of money people can borrow and then changing these limits should the need arise. With this in mind, these recent changes are to protect the financial system and ensure people can actually afford what they borrow.

After all, the Central Bank needs to establish a set of rules that take economic benefits into account just as much as any means of affordability. It is essential for these rules to dictate the relationship between house prices and credit and the risks associated with a gap between these two that continues to widen.

However, as with any intervention, there will be costs and benefits to the move that will be sure to impact home buyers and movers. This was evidenced in comments by the governor of the Central Bank who conceded this policy intervention may lead to a short term rise in house prices.

Mortgages up to Four times Household Income are now available for First Time Buyers

Balancing Financial

Resilience and Affordability

Mortgage lending rules are set by the Central Bank to help regulate the health of the property market, while ensuring borrowers can sustain their monthly repayments over time. One of the ways in which they do this is by setting limits on the amount of money people can borrow and then changing these limits should the need arise. With this in mind, these recent changes are to protect the financial system and ensure people can actually afford what they borrow.

After all, the Central Bank needs to establish a set of rules that take economic benefits into account just as much as any means of affordability. It is essential for these rules to dictate the relationship between house prices and credit and the risks associated with a gap between these two that continues to widen.

Mortgages up to Four times Household Income are now available for First Time Buyers

However, as with any intervention, there will be costs and benefits to the move that will be sure to impact home buyers and movers. This was evidenced in comments by the governor of the Central Bank who conceded this policy intervention may lead to a short term rise in house prices.

The Recent Changes to

Central Bank Lending Rules

First time buyers

can borrow up to four times their salary from January 1st which is up from the three-and-a-half times that was established back in 2015. Limits for movers and subsequent buyers will remain at three-and-a-half times their income but no longer need to produce a 20% deposit with the application.

Second-time buyers

will now instead need to produce a 10% deposit which will align with the loan-to-value limit for first-time buyers. Meanwhile, there is no change to the 30% deposit requirement for those wanting to buy-to-let.

The Central Bank has also made some changes with regard to the definition of first-time buyers. Borrowers who are either separated, divorced or who have gone through bankruptcy can now potentially be considered as first-time buyers. Those wanting to re-mortgage or get a top-up loan might also be treated as “first-time” on the provision that the property is their main residence.

You also have exemptions related to macroprudential policies which are designed to prevent disruptions due to bad credit etc and help stabilise the wide financial system. Mortgage lenders can lend over the states limits and the proportion at which they lend above depends on the type of borrower. For instance, 15% of first-time buyers or subsequent buyers can borrow above the limits and 10% of buy-to-let mortgages can take place above the stated limits.

The Recent Changes to

Central Bank Lending Rules

First time buyers

can borrow up to four times their salary from January 1st which is up from the three-and-a-half times that was established back in 2015. Limits for movers and subsequent buyers will remain at three-and-a-half times their income but no longer need to produce a 20% deposit with the application.

Second-time buyers

will now instead need to produce a 10% deposit which will align with the loan-to-value limit for first-time buyers. Meanwhile, there is no change to the 30% deposit requirement for those wanting to buy-to-let.

The Central Bank has also made some changes with regard to the definition of first-time buyers. Borrowers who are either separated, divorced or who have gone through bankruptcy can now potentially be considered as first-time buyers. Those wanting to re-mortgage or get a top-up loan might also be treated as “first-time” on the provision that the property is their main residence.

You also have exemptions related to macroprudential policies which are designed to prevent disruptions due to bad credit etc and help stabilise the wide financial system. Mortgage lenders can lend over the states limits and the proportion at which they lend above depends on the type of borrower. For instance, 15% of first-time buyers or subsequent buyers can borrow above the limits and 10% of buy-to-let mortgages can take place above the stated limits.

How Will Central Bank

Rule Changes Impact Borrowers?

These changes to mortgage lending policy will enable some people to buy a home that might not have been eligible under the outgoing rules. It’s not a case that the Central Bank is encouraging people to borrow four-times their salary but rather they want to set more proportionate and targeted parameters for credit assessment. Such changes will also make sense for many because under the current rules, some individuals are unable to buy a home in spite of affording a higher amount for rent than they might repay on a mortgage.

At the same time, experts are quick to point out that none of these changes will make any difference to a lot of prospective buyers. One reason cited in this respect is that bank mortgage calculators take factors such as number of dependent children into account which means that many still won’t be able to qualify for a mortgage even with the increase in salary multiple.

It’s still a rather complicated landscape for most people and a good example of why more mortgage customers should speak with a qualified mortgage advisor to get their advice on what the best mortgage for them.

Final Thoughts,

Access to housing is a big talking point right now and affordability is a key challenge for most people in Ireland.

While the supply of housing is an altogether different conversation, these new measures for lending are designed to make life easier for both movers and first-time buyers. The impact of this decision may not be felt straight away but as pointed out by the Central Bank Governor, short-term pain might be needed to make way for the long-term benefits that will strengthen the resilience of lenders and borrowers alike.

How Will Central Bank

Rule Changes Impact Borrowers?

These changes to mortgage lending policy will enable some people to buy a home that might not have been eligible under the outgoing rules. It’s not a case that the Central Bank is encouraging people to borrow four-times their salary but rather they want to set more proportionate and targeted parameters for credit assessment. Such changes will also make sense for many because under the current rules, some individuals are unable to buy a home in spite of affording a higher amount for rent than they might repay on a mortgage.

At the same time, experts are quick to point out that none of these changes will make any difference to a lot of prospective buyers. One reason cited in this respect is that bank mortgage calculators take factors such as number of dependent children into account which means that many still won’t be able to qualify for a mortgage even with the increase in salary multiple.

It’s still a rather complicated landscape for most people and a good example of why more mortgage customers should speak with a qualified mortgage advisor to get their advice on what the best mortgage for them.

Final Thoughts,

Access to housing is a big talking point right now and affordability is a key challenge for most people in Ireland.

While the supply of housing is an altogether different conversation, these new measures for lending are designed to make life easier for both movers and first-time buyers. The impact of this decision may not be felt straight away but as pointed out by the Central Bank Governor, short-term pain might be needed to make way for the long-term benefits that will strengthen the resilience of lenders and borrowers alike.

HAVE QUESTIONS

Read our FAQ

You're called Switcheroo.ie but do you help First Time Buyers and Home movers?

Yes, we absolutely do. As long as you are looking to buy a residential property we stand ready to help. We like the name Switcheroo as you are switching home if you are a mover and even if you are a buyer you are switching from tenant to homeowner!!!

What’s the best mortgage I can get?

That’s a question we hear a lot but there is no simple answer to this. There are a number of factors to this which both you and we need to consider when you are thinking of getting a mortgage.
Mortgages come with different terms and banks use different criteria to establish who they lend to, how much and at what rate. Don’t stress too much! You can find out pretty quickly to see if it’s worth your while. From there we will guide you through the process and make sure you get the right mortgage for you and make the process as simple as possible.

If I am a switcher how much can I save?

The Central Bank of Ireland published research that showed that many existing mortgage holders can save over €10,000 euros by switching their mortgage. It will depend on your specific circumstances but just 20 seconds on our calculator will show you what its worth for you to switcheroo.

What documents will you need from me?

Initially, none. The first step is for you to take our Financial Health Check in your secure customer portal. This will help us understand your circumstances and see if you are mortgage fit but we don’t need documentation at that stage. Only later when we move on to preparing your submission to a lender, will we need to make sure that your information is accurate, and we’ll need documentation from you then. Those include proof of your identity, income, utility bills with proof of address, as well as things like visa status where it applies. We’ll always make it clear exactly what we need and why.

Do you perform credit checks?

Our job is to make sure that you have the best possible chance of being accepted. So, we perform our own affordability check before sending anything to a lender. This leaves no footprint on your credit history.

I want to switcheroo, what’s next?

On our website there are calculators that will help you figure out what you can save or what your mortgage would cost. From there you’ll need to register into your customer portal so we can perform a Financial Health Check on you to assess what you can afford.

If all is well, we will then ask for more details on your current circumstances and the specifics of the house you want to mortgage.

Usually, this shouldn’t take more than 60 minutes, and you’ll be one step closer to a mortgage. At this point, you can have a phone call with one of our mortgage experts. They will answer any questions you have and tell you exactly what documents you’re going to need. From there, the expert team will guide you through the application process and keep you updated on progress. You can check progress online and we will keep you updated along the way.

What does Switcheroo.ie do with my data?

It’s all explained in our privacy policy, but basically: we won’t spam you and we won’t pass on your data to other companies so that they can spam you. We hate that.

How does Switcheroo.ie make money?

Yep, we don’t charge any commission. If you get a mortgage using Switcheroo.ie, the lender you use pays us a commission. Some intermediaries charge you an additional commission but not us, we are free forever. These commission never affect our advice. Our reputation and livelihood depend on us always giving our customers the best possible advice. The important bit is we’ll never charge you a penny.

HAVE QUESTIONS

Read our FAQ

You're called Switcheroo.ie but do you help First Time Buyers and Home movers?

Yes, we absolutely do. As long as you are looking to buy a residential property we stand ready to help. We like the name Switcheroo as you are switching home if you are a mover and even if you are a buyer you are switching from tenant to homeowner!!!

What’s the best mortgage I can get?

That’s a question we hear a lot but there is no simple answer to this. There are a number of factors to this which both you and we need to consider when you are thinking of getting a mortgage.
Mortgages come with different terms and banks use different criteria to establish who they lend to, how much and at what rate. Don’t stress too much! You can find out pretty quickly to see if it’s worth your while. From there we will guide you through the process and make sure you get the right mortgage for you and make the process as simple as possible.

If I am a switcher how much can I save?

The Central Bank of Ireland published research that showed that many existing mortgage holders can save over €10,000 euros by switching their mortgage. It will depend on your specific circumstances but just 20 seconds on our calculator will show you what its worth for you to switcheroo.

What documents will you need from me?

Initially, none. The first step is for you to take our Financial Health Check in your secure customer portal. This will help us understand your circumstances and see if you are mortgage fit but we don’t need documentation at that stage. Only later when we move on to preparing your submission to a lender, will we need to make sure that your information is accurate, and we’ll need documentation from you then. Those include proof of your identity, income, utility bills with proof of address, as well as things like visa status where it applies. We’ll always make it clear exactly what we need and why.

Do you perform credit checks?

Our job is to make sure that you have the best possible chance of being accepted. So, we perform our own affordability check before sending anything to a lender. This leaves no footprint on your credit history.

I want to switcheroo, what’s next?

On our website there are calculators that will help you figure out what you can save or what your mortgage would cost. From there you’ll need to register into your customer portal so we can perform a Financial Health Check on you to assess what you can afford.

If all is well, we will then ask for more details on your current circumstances and the specifics of the house you want to mortgage.

Usually, this shouldn’t take more than 60 minutes, and you’ll be one step closer to a mortgage. At this point, you can have a phone call with one of our mortgage experts. They will answer any questions you have and tell you exactly what documents you’re going to need. From there, the expert team will guide you through the application process and keep you updated on progress. You can check progress online and we will keep you updated along the way.

What does Switcheroo.ie do with my data?

It’s all explained in our privacy policy, but basically: we won’t spam you and we won’t pass on your data to other companies so that they can spam you. We hate that.

How does Switcheroo.ie make money?

Yep, we don’t charge any commission. If you get a mortgage using Switcheroo.ie, the lender you use pays us a commission. Some intermediaries charge you an additional commission but not us, we are free forever. These commission never affect our advice. Our reputation and livelihood depend on us always giving our customers the best possible advice. The important bit is we’ll never charge you a penny.

THE SWITCHEROO.IE DIGITAL MORTGAGE PLATFORM

We focus on great customer experience to
support you through your application

Don’t take our word for it, read what our customers think of us

THE SWITCHEROO.IE DIGITAL MORTGAGE PLATFORM

We focus on great customer experience to
support you through your application

Don’t take our word for it, read what our customers think of us

THE SWITCHEROO.IE DIGITAL MORTGAGE PLATFORM

We focus on great customer experience to support you through your application

Don’t take our word for it, read what our customers think of us

Call to talk

With a Mortgage Expert

Call to talk

With a Mortgage Expert

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With a Mortgage
Expert

Good news for First Time Buyers! Switcheroo Mortgages is now accepting mortgage applications for 4 times income.

Under the new central bank guidelines, first time buyers will be able to borrow up to 4 times their income from January onwards, but Switcheroo Mortgages is accepting applications from now.