The Central Bank has said that it would be concerned if changes in banks' mortgage lending policies gave the public the impression that home loans were now easier to get. However, in a briefing yesterday, the Bank played down the significance of mortgage multiples - used to relate the amount lent to borrowers' incomes - in driving house price rises.
Senior officials at the Bank confirmed that it has spoken to Bank of Ireland about its mortgage lending changes, which allow customers to borrow three times their salary. Officials said that departures from the old industry norm of loans two-and-a-half times the size of the main salary were now common.
Indeed, according to the Bank, some of the children of its own officials have been given mortgages of multiples of five or even six times their salaries.
"If someone is a young accountant with a big firm, or about to become a hospital consultant, the banks work on expected future earnings - and that has always happened," said Mr Tom O'Connell, a senior official at the Bank.
Bank of Ireland increased the amount it lends in June, and at the same time changed the wording of its mortgage advertisements to reflect this. AIB and First Active have also changed their practices this year, but have not changed their advertisements.
The Minister for the Environment, Mr Dempsey, wrote a letter to the governor of the Central Bank, Mr Maurice O'Connell, expressing concern at the Bank of Ireland policy change. An official from his department discussed the issue with Central Bank officials yesterday.
Dr Liam O'Reilly, head of supervision at the Bank, said at yesterday's press briefing on the Bank's quarterly bulletin that he would be concerned at any lessening of credit standards and that fundamental reviews of rates and multiples ought to be done in the context of easing supply. "Our major concern is to ensure that credit standards have not dropped," he said.
However, the bank played down the importance of income multiples in driving the housing market. "Rising employment, demographic changes and rising incomes are far more significant," the Bank's assistant director-general Dr Michael Casey said.
