An Overview of Interest-Only Mortgages in Ireland

Edward Gaffney, Christina Kinghan and Ciarán Nevin
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Edward Gaffney: Central Bank of Ireland
Christina Kinghan: Central Bank of Ireland
Ciarán Nevin: Central Bank of Ireland

No 3/FS/18, Financial Stability Notes from Central Bank of Ireland

Abstract: This note provides insights into interest-only mortgage lending in Ireland. Most interestonly loans outstanding as at 2017 were extended to buy-to-let (BTL) investors before 2007. Loans originated as interest-only are more likely to be on low tracker interest rates and to have relatively higher loan-to-value (LTV) ratios, with significant shares of negative equity and non-performing loans. Since 2015, less than 2 per cent of BTL loans were agreed on an interest-only repayment schedule. These loans are subject to Central Bank of Ireland mortgage measures, under which recent BTL lending has had average originated LTV ratios significantly below the 70 per cent threshold. Across Europe, only a small number of regulators impose minimum principal repayment requirements.

Date: 2018-07
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