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Dublin: 5 °C Sunday 15 December, 2019
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Central Bank keeps 10% minimum deposit rule for first time buyers for 2020

The Central Bank’s governor Gabriel Makhlouf said that the current rules are working.

Image: Leah Farrell via RollingNews.ie

THE CENTRAL BANK has today announced that is leaving its current mortgage lending rules as is after its annual review. 

The Central Bank’s governor Gabriel Makhlouf said that the current rules are working and that they will not be changed for the coming year. 

Currently, first-time-buyers need to have a minimum deposit of 10% of the value of the property, second and subsequent buyers need to have a minimum deposit of 20% and buy-to-let buyers need to have a minimum deposit of 30%. This is what’s known as loan-to-value limits (LTV).

The loan to income limit (LTI) restricts the amount of money you can borrow to a maximum of 3.5 times your gross income. For example, a couple with a combined income of €100,000 you can borrow up to a maximum of €350,000.

Makhlouf said that these rules are remaining in place in a bid to safeguard the Irish economy. 

He said: “A stable and resilient financial system is one that absorbs shocks, rather than amplifies them. And our job is to ensure that the system serves the people, the families and the firms that make up the Irish economy.

“We judge that the mortgage measures – as currently designed and calibrated – continue to meet their objectives. In the circumstances, there will be no change in LTI and LTV limits or the allowances for 2020.”

The governor added: “Over the past year, activity levels and mortgage lending have continued to grow, albeit at a slower pace. Our analysis suggests that – in the absence of the mortgage measures – affordability for mortgage borrowers would be even more acute.”

The mortgage measures were first introduced in February 2015 and are aimed at enhancing the resilience of both borrowers and the banking sector. The measures set limits on size of mortgages that consumers can borrow through the use of loan-to-value (LTV) and loan-to-income (LTI) limits. The measures are reviewed annually by the Central Bank. 

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