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Mortgage lending rules to be relaxed in Republic

From January first-time buyers will have to put down a minimum 10 per cent deposit regardless of the house value

FIRST-TIME home-buyers should find it easier to get on the property ladder as mortgage lending rules are relaxed in the New Year.

The Central Bank said it was abolishing its 20 per cent deposit demand for home loans worth more than €220,000.

From January onwards, first-time buyers will have to put down a minimum 10 per cent deposit regardless of the house value.

Under the new regime, someone buying their first home for €350,000 will need savings of €35,000 – compared to €48,000, under the existing rules.

Controversial regulations brought in last year capped mortgage lending to 90 per cent of the house value for borrowings less than €220,000, and 80 per cent for loans in excess of that.

But anyone who already owns their home and is moving will still have to stump up a 20 per cent deposit.

The rules have been overhauled after a lengthy review by the Central Bank.

Builders, estate agents and surveyors broadly welcomed the changes.

Pat Davitt, chief executive of the Institute of Professional Auctioneers and Valuers, said they would give a definite boost to the housing market.

"It will be particularly relevant in Dublin and other urban centres where prices are higher and aspiring purchasers have been disproportionately impacted," he added.

Tom Parlon, of the Construction Industry Federation, said the changes should help first-time buyers and lead to banks lending to house builders again to start development.

"The changes in new lending by banks over the loan to value ratio should allow banks to lend to more people who can afford to service mortgages; those with a strong record of paying rent for example," he added.

Philip Lane, governor of the Central Bank, said: "Over the past 18 months, the measures have helped to ensure that those who buy homes are better prepared to manage their mortgage payments in the event of a future downturn in the economy or in the housing market.

"While our review process affirmed the value of the overall framework, some modifications to the measures were suggested by our evidence-based analysis."

He added: "The 3.5 times ceiling on the loan to income ratio remains unchanged.

"The 90 per cent loan to value ratio limit for all first time buyers simplifies the overall framework, with only 5 per cent of lending permitted above this level."

Rules for buy to let borrowers and exemptions for negative equity mortgage borrowers remain unchanged.

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