THE CENTRAL BANK has announced a targeted change to Ireland’s mortgage rules aimed at making it easier for homeowners to buy a new property before selling their current one.

Under the update, certain short-term ‘bridging loans’ (a short-term, high-interest loan designed to provide immediate cash to bridge the gap between purchasing a new home and selling an existing one) will be exempt from loan-to-income (LTI) limits.

These loans are typically used by homeowners who want to secure a new home before their existing property is sold.

The LTI limit is a maximum of four times gross annual income for first-time buyers, and three-and-a-half times gross annual income for second and subsequent buyers

In simple terms, this change means borrowers taking out this type of loan will no longer be restricted by how much they earn, as the loan can be repaid from the sale of their original home rather than from regular income.

The loans are short-term, lasting up to 18 months, and other safeguards, including loan-to-value (LTV) limits, will still apply.

The Central Bank said the change reflects how the mortgage market is evolving and is designed to support people moving home without weakening lending standards.

Vasileios Madouros, deputy governor of the Central Bank, said the income limit is “less relevant” for this type of lending, as repayment comes from selling a property rather than monthly earnings.

“This is a proportionate response to market developments that maintains our core objectives of sustainable lending,” Madouros added.

Government plan

Tánaiste Simon Harris welcomed the move, saying it could be particularly helpful for older homeowners looking to downsize, as they may have lower incomes but significant housing equity.

“It is an important measure in our efforts to increase housing choice for older people and I very much welcome the development,” Harris said.

“This change to the lending rules is in line with the government’s housing plan commitment on the availability of bridging finance to support rightsizing. It is an important measure in our efforts to increase housing choice for older people,” Harris said.

He added that the change would “facilitate the provision of additional bridging finance while maintaining the protections that the mortgage lending rules provide for the financial system and consumers”.

The Central Bank stressed that lenders must still carefully assess each application and ensure the loans are suitable, with full consumer protections remaining in place.

It also said the impact of the change will be kept under review.

All other mortgage rules remain unchanged, including limits on how much people can borrow relative to a property’s value.