Macroprudential Measures and Irish Mortgage Lending: Insights from H1 2017

Christina Kinghan, Paul Lyons and Yvonne McCarthy
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Christina Kinghan: Central Bank of Ireland
Paul Lyons: Central Bank of Ireland

No 13/EL/17, Economic Letters from Central Bank of Ireland

Abstract: This Economic Letter provides an overview of residential mortgage lending in Ireland in H1 2017 for the five credit institutions reporting loan-level data to the Central Bank of Ireland as part of their compliance with loan-to-value (LTV) and loan-to-income (LTI) macroprudential Regulations. H1 2017 represented the first half year of lending that incorporated the changes announced following the 2016 Review of the Regulations. In total, 14,997 loans were originated totaling €3.05 billion, an increase of 33 (22) per cent on the corresponding value (volume) of lending in H1 2016. Average LTV and LTI ratios rose slightly over the period for both First Time Buyers (FTBs) and Second and Subsequent Buyers (SSBs). Only a limited number (30 loans in total) of FTBs had an allowance to exceed the FTB LTV limit of 90 per cent LTV in H1 2017. In contrast, 20 per cent of the aggregate value of SSB lending in H1 2017 exceeded the 80 per cent LTV limit for that group. Regarding the LTI ratio, 18 per cent of the aggregate lending to both FTBs and SSBs exceeded the limit of 3.5, which represents an increase on the 12 per cent figure recorded in H1 2016. The characteristics of loans and borrowers with LTI allowances in H1 2017 were similar to those observed in H1 2016. Notably, FTBs accounted for the largest share of LTI allowances in H1 2017. On average borrowers with an LTI allowance had a lower income and were younger than borrowers without an LTI allowance. There was also a higher proportion of single borrowers in the ‘with allowance’ group.

Date: 2017-10
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