Central Bank Governor Patrick Honohan has hinted that the new 20% deposit rule for prospective homebuyers may be eased.
The new regulation was introduced last month, and it specified that people must put down a 20% deposit before a mortgage is approved.
It was also announced that banks would only be able to lend three and a half times the borrower’s gross income.
These tough new rules were meant to come into effect on January 1, 2015.
There was a huge political backlash against these rules, however, and many feared that such tough measures would make it very difficult, if not impossible, for many first time buyers to access the property ladder.
Speaking at an event in Portlaoise today, Mr. Honohan outlined the role that mortgage insurance may have on the mortgage market.
This type of insurance is taken out by banks and lending institutions to protect themselves from losses incurred if the borrower defaults on the repayments. Such product is available in other countries like the United States, Australia, Canada, and many others.
This insurance would in principle allow a bank to lend up to 90% of the property price, with the borrower providing a 10% deposit, and a further 10% of the mortgage being insured by a third party. The cost of the insurance would be paid by the borrower.
Mr. Honohan also said that limiting high loan-to-income mortgages would be key to ensuring customer protection in the future and avoid over-indebtness.