Mortgage brokers have asked the Central Bank to introduce a mandatory short-term loan warning warning applicants that debt could reduce their ability to get a home loan.
In a submission to the Central Bank as part of a review of ‘macroprudential’ mortgage rules, Brokers Ireland said borrowers must be made aware of the impact of short-term debt and how it affects their ability to qualify for a mortgage, especially mortgage exemptions. .
Brokers Ireland Director of Financial Services Rachel McGovern said this should be taken into account when people borrow to buy a car.
“There should be a warning on all short-term debt that taking out a short-term loan can affect how much you can borrow when taking out a home loan,” she said.
The submission also called on the Central Bank to adjust mortgage rules so that borrowers can access a percentage of their net disposable income (NDI) rather than 3.5 times their gross salary.
Brokers Ireland has proposed homebuyers be allowed to borrow at rates where repayments would match up to 35% of their NDI.
He said research by the Residential Tenancies Board last year showed renters already spend 35.58% of their monthly income on rent.
He gave the example of a single applicant earning €50,000 a year who is allowed to borrow €175,000 under current rules — prices outside major markets such as Dublin.
They estimated that loan repayments over 30 years were about 29% of the borrower’s NDI.
Ms McGovern said the proposed rule change would allow the same borrower to access €210,000, making buying a house more realistic.
She said that out of 23 European countries, only three, Ireland, the UK and Denmark, use the loan-to-income ratio method to calculate how much can be borrowed for a mortgage.
“New long-term fixed interest rates below 3% for periods of 20, 25 and 30 years make NDI’s calculation method viable for borrowers who don’t have to worry about interest rate hikes. interest,” she added.
High rental costs must also be part of the Central Bank’s scrutiny, Ms McGovern said, as she warned of the risk that future homebuyers could be hurt by high interest rates in due to global uncertainty.
“By the time the Central Bank gets around to adjusting the rules, and there’s no guarantee they will. — the changes might be small, we might be in a new era of higher interest rates,” she said.
“Aspiring home buyers have already lost out on falling house prices in recent years.
“They could now also lose the lowest mortgage rates the country has seen, even though they are above the eurozone average.
“The lack of availability of sufficient housing at affordable prices is leading to seismic, disruptive and unwanted societal changes that do not bode well for the future.”