Brokers Ireland Mortgages Winter 2018
Mortgage Update Winter 2018 Kimberley Hyland - Mortgage Manager
2017-2018 has seen a growth in Mortgage lending. We have also seen a lot of changes to the credit process. The fundamental aspect of lending has remained unified across the lenders. These are important factors such as credit rating, CBI rules, repayment capacity and affordability. Changes came in many forms over the last 18 months, not only to rates and documentation but the implementation of GDPR, the addition of the Central Credit Register, Lender Offers such as cash back, home insurance etc. We have welcomed an additional lender re-entering the market, BOI. Also the welcomed changes to Self Employed Income and how its assessed. Most recently we have seen the PepperMoney loan book sold to Finance Ireland who are very shortly taking over all new pepper applications. Amendments to the authorisation process has also been well received.
Coming in 2019 we will see the addendum come in to the lending market, applicable to both the branch and intermediary mortgage application process. From the 21 st March we will see the Grandfathering for Mortgage Credit Agreements cease. The requirement is for a professional qualification for the QFA or the APA designation for loans, which is the Regulation and Loans exams which is recognised by the Central Bank under its Minimum Competency Code. We will now look at the CBI Rules, ICB and CCR, the Addendum, Income, Affordability, RPC and Balance of Funds, Packaging Followed by Moving Forward in 2019.
CBI Rules • On the 27th of January 2015 - Central Bank of Ireland announced new restrictions on mortgage lenders in relation to the loan to values and loan to income ratios • The new rules for Loan to Value (LTV) for principal dwelling houses (PDH) differentiate between First Time Buyers (FTBs), Non- First Time Buyers (NFTBs) and Buy To Lets (BTLs).
NFTB CBI rules PDH mortgages for NFTBs are subject to a limit of 80% LTV Example Property price €350,000 20% deposit = €70,000 *unless the lender approves this application as part of its 20% of lending allowed to exceed the new limits. It’s important to note that borrowers in negative equity who wish to obtain a mortgage for a new property are not within the scope of these new LTV limits.
FTB CBI rules • The ceiling on the loan to value (LTV) ratio for all first time buyers is set at 90 per cent. This is a shift from the previous requirement, which put the ceiling at 90 per cent for loans up to €220,000 but at 80 per cent for the balance of loans above €220,000. • This means that first time buyers will be able to borrow up to 90 per cent of a value of a home, with a requirement for a 10 per cent minimum deposit. • The structure of the proportionate LTV allowances is amended. Five per cent of the value of new lending to first time buyers is allowed above the 90 per cent LTV limit
Buy to Lets BTLs mortgages are now subject to a limit of 70% LTV. This limit can only be exceeded by a maximum of 10% of the euro value of all housing loans for non PDH purposes annually. Example - BTL: Property price €350,000 30% deposit of €105,000 is required, *unless the lender approves this application as part of the 10% exception allowed to exceed the new limits.
Loan to Income (LTI) In relation to the Loan to Income (LTI) measures for PDH mortgages, these are subject to: • A limit set at a multiple of 3.5 times loan to gross income. • This limit must not exceed more than 20% of the euro value of all housing loans for PDH purposes annually split at 20% FTB and 10% NFTB Example Gross Income of joint borrowers of €40,000 and €30,000 Maximum loan now allowable is €245,000, unless the lender approves this application as part of its 20% allowed exceeding the new limits
Exemptions Applicants can apply for an exemption for LTV or LTI. (not both) Generally a property should be identified Must have repayment capacity Must not be at max on the other exemption. i.e. if looking for LTI exemption the can not be at maximum loan to value on the application. Must have clean ICB Must be well within nets
ICB & The Central Credit Register What is an ICB The Irish Credit Bureau (ICB) is the biggest credit-referencing agency in Ireland. The bureau is an electronic library or database that contains information on the performance of credit agreements between financial institutions (for example, banks and building societies) and borrowers (the citizen). A credit agreement can include a mortgage, car and personal loans and leasing and hire purchase agreements. Credit card details are included in the ICB library. Credit cards and credit history In the past, information was mainly supplied by the lenders only where credit cards were revoked or cancelled. Now lenders have the option of supplying full information about opening and closing balances to the ICB. Your card repayment performance will be measured by the ICB on a monthly basis but due to the nature of credit cards, you also get an additional 30 days before negative information about your record is recorded.
ICB & The Central Credit Register Length of time records are kept for Members of the Irish Credit Bureau send information about to the loans they have given to their customers to the Bureau. Therefore, information about a loan will be kept on the ICB database for the full term of the loan whether this is a 3-year personal loan or a 30-year mortgage. The ICB Member records the customer's performance on the repayments and this information is then sent to ICB where it is also recorded. When the loan is completed or when it reaches a frozen state (that is when it is Written Off) the 5-year retention term clock starts ticking. In other words, regardless of what the customer’s performance on the loan was like, once the loan is terminated in its current state - it will then stay on the ICB Database for 5 years from that date
ICB & The Central Credit Register What is The Central Bank Register • The Government gave a commitment to the IMF to develop a legal framework that would facilitate the collection and centralisation of information on credit, which has resulted in the creation of the Central Credit Register (the Register). • The Register is a secure database established and controlled by the Central Bank of Ireland, under the Credit Reporting Act 2013. It is used to collect and store personal and credit information on loans of € 500 or more from lenders.
• From 30 June 2017 and every month after that, the lenders will submit information to the Register to enable the updating of the comprehensive credit report. The credit report will help lenders when it comes to making decisions about their loans and loan applications. • The Register will promote greater financial stability by supporting a full and accurate assessment of loans and loan applications.
What is Included on the Central Credit Register • Credit Cards • Mortgages • Overdrafts • Personal Loans What is going to be Included on the Central Credit Register • Hire Purchase/PCP* • Utility Bills • Income and salary information • Deposit accounts • Tax Liabilities • The court services • The Insolvency Service of Ireland * these are intended to be included in the future.
Cont … • Loans will be included if the loan is for €500 or more, and the borrower lives in the State at the time of applying for the loan, or • where the loan agreement or loan application is governed by Irish law. Over 500 Lenders are included on the Register including, • Asset finance house • Banks • Credit Unions • Firms that have acquired loan books from Irish Financial Institutions • Licenced moneylenders • Local authorities • NAMA
When will the Register start? • From 30 June 2017, and every month after that lenders will submit the personal and credit information to the Register. This will apply to any existing loans they have of €500 or more at 30 June 2017, and any new loans of €500 or more that you take out after that. • From 30 March 2018, information on loans from licensed moneylenders and local authorities are included in the Register. • How far back does the information go? • Personal and credit information for loans existing at 30 June 2017 will be added to the Register from 30 June 2017. No details about transactions on your loans before 30 June 2017 will be submitted to the Register.
What information will be included in the credit report? Personal information includes • Name, current and previous addresses, DOB. PPSN number, gender, Eircode and telephone number. Credit information given includes • Loan type, Lender name, Loan amount, Loan balance, outstanding balance, no. of overdue payments, date of next payment and the amount of next payment. • The Central Bank will publish on the website www.centralcreditregister.ie the exact date of when this service will become available.
Addendum to the Consumer Protection Code 2012 Addendum for Enhanced Mortgage Switching Measures: Transparency and Switching The Central Bank is now introducing new and amending certain existing provisions of the Consumer Protection Code 2012 (the 2012 Code). This Addendum is effective 1 January 2019. The following parts of the 2012 Code are now amended: Chapter 4 – Provision of Information Chapter 5 – Knowing the Consumer and Suitability Chapter 6 – Post-Sale Information Requirements
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