Gabriel Makhlouf, Governor, Central Bank of Ireland

Op-Ed: Have your say on mortgage measures

Gabriel Makhlouf, Governor, Central Bank of Ireland

The Central Bank of Ireland’s mortgage measures are aimed at strengthening the resilience of both borrowers and the banking system. The measures set limits on the size of mortgages to ensure consumers do not borrow more than they can afford and help to build resilience in the financial system. They support good lending practices and guard against a repeat of the credit-fuelled, house price boom that we saw in the 2000s re-emerging in the future.

We are now undertaking a wider, overarching review of the Mortgage Measures Framework, and I am encouraging your readers in Cavan to share their views and experiences on all aspects of the mortgage measures in a new online survey.

The survey invites people to share their views and experiences on the functioning of the mortgage measures to date, their perspectives on what a sustainable mortgage market looks like, and what elements of the mortgage measures they think the Central Bank should focus on as part of the framework review.

The measures were introduced by the Central Bank in 2015 to help guard against excessively loose lending standards in the mortgage market. While not always understood as such, the measures are essential to our mission to serve the public by maintaining monetary and financial stability and ensuring that the financial system operates in the best interests of consumers and the wider economy.

The mortgage measures have been effective in strengthening bank and borrower resilience. We’ve seen that most clearly during the pandemic when almost half of all workers, including many people in Cavan, relied on the State for some of their income. By mid-summer 2020, payment breaks were granted on more than €10.8 billion of mortgage debt in the domestic banking system. Loans drawn down before the introduction of the mortgage measures accounted for 72% of these payment breaks - this points to more resilient borrowers since the measures were implemented. They have also played a critical role in stopping credit dynamics from amplifying the price effects of the demand-supply imbalance in the housing market.

We are very aware of the challenges that the current housing market poses for many people, especially younger generations. At their core, these challenges stem from an underlying imbalance between the demand for, and supply of, housing. Policies that affect housing construction are complex and go beyond the Central Bank’s mandate. But a sustainable provision of mortgage finance is a necessary ingredient to support the broader functioning of the housing market.

We are listening, and I invite people in Cavan to share their views and experiences by completing the survey at before 5pm on July 30, 2021.

I look forward to reviewing the responses and incorporating them into our understanding of the role the measures have played in our economy and society.