Central Bank 'not likely' to loosen mortgage rules despite AIB's call

‘Shouldn’t be set in stone’: AIB’s Colin Hunt is so far alone among the top brass of Irish banking in calling for loosened rules. Photo: Gerry Mooney

Shawn Pogatchnik

The Central Bank faces mounting pressure to loosen its limits on mortgage lending after a four-year clampdown, with a call from AIB that the time has come for change.

But economists say they expect no major moves when the Central Bank publishes its lending review later this year.

They cite several factors, from a new governor to potential Brexit bombshells, as reasons for keeping a tight rein - even though househunters are struggling to qualify for mortgages at current prices.

The issue gained a sharp new focus at the weekend when AIB's Colin Hunt, chief executive of the country's biggest mortgage provider, became the first top executive at a pillar Irish bank to say the rules were too tight.

He cited recent reports that property prices were stagnant and, by some measures, declining in Dublin.

Mr Hunt told the 'Sunday Independent' that the Central Bank rules "have achieved their objectives but they shouldn't be set in stone".

Current rules mean first-time buyers must make a minimum 10pc down payment and, in most cases, cannot borrow more than 3.5 times their annual household income.

Mr Hunt said normal demand for housing in Ireland meant building 35,000 to 40,000 homes annually, nearly double the current level.

"In normal circumstances, in an uncontrolled environment you would have rampant house price inflation given that imbalance," he said.

An independent economist, Alan McQuaid, said Mr Hunt was reflecting banks' desire to increase profits - but Ireland really needed "a lot more affordable housing". "Supply is the answer, not loosening the rules to allow people to take on unmanageable debt," Mr McQuaid said.

"With Brexit so near, it's highly unlikely that the Central Bank would pick this moment to expose borrowers to more risk. It's even more unlikely given that Gabriel Makhlouf, an outsider, has just arrived as governor. He's less likely to bow to pressure than a domestic figure."

So far, Mr Hunt is alone among the top brass of Irish banking in calling for loosened rules, although Taoiseach Leo Varadkar said much the same thing in July.

KBC Bank chief executive Peter Roebben told the Irish Independent in August he supported retaining the rules in part because "people are saying I can't go to the market now because the prices are just too high". He said loosening the rules would risk a return to the over-leveraged lending of the Celtic Tiger years and called the Central Bank policy "essentially good".

He said banks and property builders needed to focus on affordability and "what debt people can bear".

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