Macroprudential Measures and Irish Mortgage Lending: An Overview of Lending in 2016

This Economic Letter provides an overview of residential mortgage lending in Ireland in 2016 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. A total of €5.7 billion of mortgage lending was originated by these banks in 2016. The majority of new lending was for the purchase of primary dwelling homes (PDHs); within this group, first-time buyers (FTBs) accounted for 51 per cent of new lending and second and subsequent borrowers (SSBs) for the remaining 49 per cent. The average LTV and LTI ratios of FTBs and SSBs in-scope of the Regulations in 2016 were similar to those observed in 2015. Across the five institutions, 12 per cent of the value of PDH lending exceeded the LTV limit and 13 per cent exceeded the LTI limit for that group. We observe differences in the characteristics of borrowers with and without an allowance to exceed the limits of the Regulations. Specifically, a larger share of SSBs, couples, higher income and Dublin-based borrowers presented among the PDH group with an LTV allowance, relative to those without; SSBs accounted for 61 per cent of that group. In contrast, a larger share of FTBs, single persons, lower income and Dublin-based borrowers presented among the PDH group with an LTI allowance; 70 per cent of that group were FTBs. We find that approximately 66 per cent of FTBs and SSBs in 2016 originated a mortgage with an LTV that was below their regulatory limit. Among FTBs with an allowance to exceed the LTV limit set by the Regulations, the majority had an LTV at or below 90 per cent. This pattern is also evident among SSBs with an allowance to exceed the regulatory LTV limit.