Mortgage lending in Ireland during the 2010s

Edward Gaffney and Christina Kinghan
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Edward Gaffney: Central Bank of Ireland
Christina Kinghan: Central Bank of Ireland

No 9/FS/21, Financial Stability Notes from Central Bank of Ireland

Abstract: This note assesses residential mortgage market developments in Ireland during the 2010s and in 2020, with a focus on the period since the introduction of the Central Bank of Ireland’s mortgage measures in 2015. Lending increased continuously between 2014 and 2019 to almost €10 billion per year, before declining in 2020 amid COVID-19. During the 2010s, income growth among first-time buyers exceeded growth in average incomes, and the average homebuyer was older than previously, reflecting challenges to affordability and pent-up demand after low home purchase volumes during the early 2010s. The mortgage measures reduced lending at high LTI and LTV ratios, assisted by more cautious risk appetites among lenders and borrowers. Around 20 per cent of lending is above the LTI and LTV limits in the mortgage measures, typically offered to relatively young borrowers in Dublin. A growing share of lending is at or close to the LTI and LTV limits. In 2020, 20 per cent of lending was at the LTI limit and 40 per cent was at the LTV limit. This indicates that in the absence of the mortgage measures, new lending would have involved higher levels of indebtedness, especially among first-time buyers and borrowers earning average or low incomes.

Date: 2021-10
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