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New Tough Lending Rules Cools Irish Property Market

The latest data has shown new tougher lending rules brought in by Ireland's Central Bank are starting to have a cooling impact on the housing market.

The rules which were introduced at the end of January this year brought in stricter lending regulations aimed at increasing the stability of Ireland's banking and housing sectors. It is hoped the move will prevent price spirals in the future.

One of the main points of focus was the introduction of new Loan to Value (LTV) rules on a range of mortgages including those for first time buyers, those for non-first time buyers and Buy-to-let investors.

Non-first time buyers applying for a mortgage for a Principal Dwelling are now forced to save more before they can be considered for a new loan. The new limit is set at a maximum of 80 per cent Loan to Value ratio.

First time buyers can apply for 90 per cent mortgages on properties valued up to 220,000 euros. Should they wish to apply for a mortgage on a more expensive home a 90 per cent LTV limit will apply on the first 220,000 euros and 80 per cent LTV will apply on anything above this amount.

Structural Defects Insurance

Buy-to-Let mortgages are now also now subjected to a new lending limit of 70% loan to property value making things tougher for landlords and property investors. Loan to Income mortgages for a principal dwelling are now limited to a maximum loan of 3.5 times gross annual income.

Reports released this month by website Daft.ie, Ireland's leading property website, show that despite a growth in the average property asking price in 6 of the last 7 financial quarters, the pace of growth has now slowed from an average of 5% to below 2%. In addition the most expensive postcodes in the country have seen average prices stagnate since late 2014.

The figures can be put down to a slowdown in interest from buyers in the market as the new lending rules have made saving a deposit for a home much more difficult even for professional couples. Around 8,000 houses and apartments were sold in the second quarter of 2015 which marks a 10% fall in the number of properties sold.

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