Central Bank announces major changes to its mortgage lending rules
Daragh Cassidy
Head Writer

In a surprise move, the Central Bank has decided to ease its mortgage lending rules. But will it help prospective home buyers or just lead to an increase in prices?


The Central Bank’s mortgage lending rules were initially introduced in 2015 to prevent a return to the reckless lending which caused property prices to skyrocket during the Celtic Tiger years. 

However they have proved controversial in recent times.

Many felt the limits were way too restrictive and prevented many people from being able to borrow enough to afford a home. 

This in turn led to people being trapped renting, often paying rents that were far in excess of what a mortgage would be. Indeed Ireland is one of the only developed countries in the world where it’s far cheaper to have a mortgage than to rent.  

On the flipside, others have argued that the rules have helped keep a lid on property price growth, which although strong over the past few years, may have been even higher had the rules not been in place. 

Last year the Central Bank announced a more in-depth review of the rules and invited responses from interested parties. 

On the foot of the review, in a major surprise, it’s now tweaked the lending rules….

What’s changing?

First-time buyers can now borrow up to four times their gross income. This is an increase from 3.5 times income previously. 

The requirement to have a deposit of at least 10% remains the same.

Second-time and subsequent buyers or 'movers' can still only borrow 3.5 times their gross income. However the deposit requirement is being reduced to 10% from 20%. 

The Central Bank says the different lending limits between first-time buyers and movers is mainly due to the fact that first-time buyers have been shown to be lower-risk in Ireland. What's more, first-time buyers are generally at an earlier point in their careers and more likely to get a wage increase in the immediate years after they take out their mortgage. In other words, while they might take out a mortgage that is initially four times their income, this may reduce to only three times their income over the coming few years as their income grows.

So-called 'exemptions' or exceptions to the rules are still allowed: 15% of a bank's mortgage lending to either first-time buyers or movers can breach either the income limit or deposit requirement rule.

With an exemption a mortgage seeker can potentially borrow up to 4.5 times their income. 

Expansion of criteria for first-time buyer 

What constitutes a first-time buyer is also changing. 

People who are divorced and people who have been declared bankrupt (who may therefore have previously owned a home) can now be considered first-time buyers. But you must no longer have any interest or share in your former home.

When do the new rules come into effect?

1st January 2023.

What difference will it make?

Say you’re a single applicant on a salary of €50,000 a year. You will now be able to borrow €200,000 instead of €175,000.

If you’re in a couple on a joint income of €80,000 a year, you’ll now be able to borrow €320,000 instead of €280,000.


The new measures will prove controversial.

The 3.5 times limit was one of the strictest in the world and banks, brokers and indeed some mortgage seekers wanted the rules to be loosened.

However, without a corresponding increase in the supply of new homes, property prices may just increase further as there will now be more money chasing the same number of homes.

However building homes at a price point of only 3.5 times income is difficult in most major cities. Especially seeing as all homes have to be A-rated for energy efficiency. So the hope is that the construction industry will now find it more viable to build homes in certain locations and mortgage seekers will be able to get mortgages big enough to buy those homes.

The four times limit is, of course, a limit and not a target. Banks may refuse to lend this amount and mortgage seekers don't have to ask for it. Indeed, only recently, ICS Mortgages capped its lending at 2.5 times income.  

Also, until now, 20% of a bank's lending could be up to 4.5 times income anyway.  

The deposit rule change will also provide a much-needed reprieve for many second-time buyers who may be stuck in their first home and who are looking to trade up as their family grows but who simply can’t save the required 20% deposit. 

Our public engagement showed strong support for mortgage measures. At the same time, it is clear that affordability and access to housing are key challenges facing many people in Ireland. At the core of these challenges is the need to increase the supply of housing. A lot has changed since the measures were first introduced. The changes we are announcing are both targeted and proportionate, and recognise the resilience built up over the last decade and the structural changes across the economy.

Governor of the Central Bank of Ireland Gabriel Makhlouf

Discover more about mortgages

If you’re hoping to take out a mortgage in the near future and are looking to brush up on your mortgage knowledge, make sure you check out the following articles:

Keep an eye on our blog and guide pages for more helpful mortgage-related content. 

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Let’s hear from you!

Are you happy with the new measures announced by the Central Bank? Or are you afraid it’ll just lead to an increase in property prices?

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