Review of central bank mortgage lending rules to be published by november – the sunday business post
Lane also said that the number of mortgages in arrears of over 90 days was just below 66,000 at the end of September 2015. Referring to the Central Bank’s quarterly bulletin, Lane said: “The economy will continue to grow strongly this year, with GDP growth expected to moderate only slightly to 4.8 per cent. “The Central Bank is open to tightening or loosening the calibration of these rules in response to the evidence; still, the value of stability in a rules-based framework means that the evidence threshold to justify adjustments to these rules is significant. Lane said the review would be based on an analysis of the evidence
provided by data on the first year of the operation of the rules, while taking into account other factors that may have influenced the mortgage market. “More generally, small, highly-globalised countries such as Ireland are inherently more volatile than larger economies: we can grow strongly for extended periods but are also especially vulnerable to negative shocks. For this reason, it is essential that the Central Bank is pro-active in the deployment of macroprudential policies that can improve resilience and mitigate the procyclical dynamics associated with excessive leverage.” Related Stories But he warned: “While much has improved, vulnerabilities remain. The strong growth outlook provides an opportunity to address the legacies stemming from still-high levels of public and private sector indebtedness.
Externally, the main current global risk factor relates to economic and financial conditions in some emerging economies. Closer to home, the Central Bank is also keeping a watchful eye on Brexit-related risks to the economy and the financial system. “Tools such as mortgage rules and the recently-introduced system of counter-cyclical capital buffers would have mitigated the costs of the boom-bust credit cycle in Ireland in the mid-2000s.
The Irish economy remains vulnerable to adverse shocks, with limits to household leverage offering protection to households and banks.” Philip Lane told the Committee on Finance, Public Expenditure & Reform that the bank would be carrying out periodic reviews – and the findings of the first one will be revealed by November. “As I have already stated, The Central Bank is firmly committed to deploying such tools on an ongoing basis, with periodic reviews to ensure that the measures are appropriately calibrated. I expect the first review of the mortgage rules to be published by November this year.” The governor of the Central Bank has said that the first review into strict loan-to-value mortgage limits will be published by the end of the year. Lane told the hearing: “The new rules that impose loan-to-value and loan-to-income limits on most mortgages were introduced to protect borrowers and contribute to a safer financial system, which in turn also contributes to a more stable economy over the longer term. Lane told the hearing that the mission statement is “safeguarding stability” and “protecting consumers”.
Priorities for the bank in immediate future are “the preservation of financial stability, while also working to ensure that the financial sector operates in the best interests of its customers,” he said He added: “The rules-based framework is intended to promote the resilience of both banks and households and, as such, should be viewed as a permanent feature of the system. Lane said: “While the economic recovery has gained pace, the number of legal proceedings against mortgage holders have also been increasing. The Central Bank’s continued role in this area is to ensure that the banks adhere to the Code of Conduct of Mortgage Arrears, meet the criteria for sustainable solutions and continue to engage with their customers to find non – repossession solutions whenever possible. “ He said: “While there has been significant progress in reforming the institutional setup of the euro area, the recent Five Presidents’ Report highlighted that further reforms could help in improving the resilience of the monetary union.
This reform agenda should be a high priority for European policymakers.” Governor Philip Lane tells committee rules would have mitigated cost of crash Lane warned that the financial crisis exposed the fact that the design of the euro area suffered from a lack of risk-sharing and crisis management mechanisms.
He added: “It is imperative that lenders continue to work with over-indebted consumers to try to resolve any arrears situation and to achieve sustainable solutions with co-operating borrowers. Clearly for many, there is no quick remedy or solution to long term arrears and careful, empathetic but realistic approaches need to be taken.
” “This reflects the confluence of several positive factors, including the employment-rich nature of the recovery, a less constrained policy environment, the boost to purchasing power from lower energy prices, the on-going easing of the balance sheet legacies of the crisis and broadly favourable conditions in Ireland’s main export markets. It is the positive alignment of all these factors that has helped growth to strengthen and supports a continued favourable outlook.”