The central bank left its mortgage rules unchanged after publishing its annual review today.
However, it will now allow banks to roll over approved upper limit loans from one calendar year to the next.
The Central Bank also announced its intention to introduce new rules for real estate funds.
Mortgage rules are part of the Central Bank’s Financial Stability Review which tests the strength of the financial system.
The rules for mortgage loan value limits and borrowers’ income limits remain unchanged.
The ongoing review of the procedures will now be open for public consultation next month.
The review will not be completed until the second half of next year.
In the meantime, banks will now be able to roll over the loan percentage, above limits, approved from one calendar year to another.
They have also been given the green light to participate in the government’s planned joint equity loan scheme.
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The mortgage measures were first introduced in February 2015 and aim to enhance the resilience of both borrowers and the banking sector.
The central bank also intends to introduce new rules on borrowing limits and monetary requirements for real estate investment trusts, which now account for 40% of commercial real estate investments.
Today’s Financial Stability Review says the risks of the Covid-19 pandemic are “reducing” and its impact on the banking sector is beginning to “dissipate”.
However, he warns that there is a risk of a sudden increase in interest rates if inflation continues.
There are also risks if repercussions of events such as the difficulties experienced by Chinese real estate fund Evergrande spread outside Asia.
The Central Bank has taken a closer look at REITs operating in Ireland. It now wants to introduce measures to reduce the amount of borrowing by these funds and increase their ability to repay investors quickly.
Over 200 trusts registered in Ireland now account for 40% of commercial real estate investment here, worth around €23 billion.
The central bank left the CCyB requirement for banks unchanged at 0%, but said it expects to reintroduce it next year as the recovery continues.
The bank had cut its CCyB to 0% from 1% in April 2020.
Speaking in a briefing, the central bank governor said he expects the increased demand in the real estate market that may arise from the government’s new “First Home” syndicated equity loan scheme will drive prices up, if there is no oversupply. .
But Jibril Makhlouf said that preventing banks from participating would be disproportionate and that he did not believe that participation would jeopardize their financial stability.
Commenting on the central bank’s decision today that macroprudential mortgage rules remain unchanged, Brokers Ireland described the move as “disappointing, if not surprising”.
“It will be another year before anything more substantial like mitigation in particular, we can hope for the current 3.5 times gross salary limit to be tightened,” Brokers Ireland said.
Rachel McGovern, Director of Financial Services for Brokers Ireland, said the slight change in the carry over of unused allowances was welcome.
Irish brokers have proposed to the central bank changing the current loan-to-income ratio from three and a half times the gross salary multiplier to a percentage of net disposable income (NDI).
“Using net disposable income would be a more realistic mechanism for judging affordability,” McGovern said today.
“New long-term fixed interest rates of less than 3% for 20, 25 and 30 year periods make the NDI method of calculating sustainable for borrowers,” it added.
Separately, just over a quarter of first-time homebuyers were aged 30 or younger last year, according to an analysis of data by the Association of Banks and Payments.
That halved in 2004 when six out of ten first-time homeowners were in that age group.
Using statistics from the Department of Housing, Local Government and Heritage, the BPFI study also found that those who move out of their home – generally “trading” – are also getting older.