Central Bank changes positive for Irish home building
In a recent move made by the Central Bank, it has changed the ceiling on the loan to value (LTV) ratio for all first time buyers to 90% from the current 90% for loans up to €220,000 and 80% for the balance of loans above €220,000.
This move will enable first-time buyers to borrow up to 90% of a value of a home, with a requirement for a 10 per cent minimum deposit. This can only be good for the construction industry in Ireland and lets hope we see increased production in 2017.
Main talking points
- The ceiling on the loan to value (LTV) ratio for all first time buyers will be set at 90%. This is a shift from the current requirement, which puts the ceiling at 90% for loans up to €220,000 but at 80% for the balance of loans above €220,000.
- The 20% minimum deposit requirement (i.e. maximum LTV ratio of 80%) continues to apply to second and subsequent buyers.
- The structure of the proportionate LTV allowances is amended. 5% of the value of new lending to first time buyers will be allowed above the 90% LTV limit and 20% of the value of new lending to second and subsequent buyers for primary residences will be allowed above the 80% LTV limit. This replaces the current requirement which allows 15% of total lending for primary dwellings (the sum of lending to first time buyers and second and subsequent buyers) above the LTV limits.
- The current two-month valuation period will be extended to four months in recognition of the fact that a portion of house sales can take longer than the average three months to conclude.
The new measures will be in place from 1 January 2017.