Banks are to be asked to tighten up their mortgage lending procedures to ensure loans are properly secured and that customers are not allowed to overestimate their income.
The Irish Financial Services Regulatory Authority (IFSRA) said today it had considered thefindings of a study undertaken into mortgage lending and the prudential and consumer issues raised.
It is to write to each mortgage lender with its conclusions, but said it was not possible to publicise its findings on specific institution.
While the regulator said no matters had come to light that raised questions of financial soundness, it will seek "a tightening up" in two areas.
These areas relate to client income verification and the funding of mortgage loan balances. "This is to strengthen the procedures to ensure that loans are properly secured and will be repaid in full," IFSRA said.
The body will consult with both the industry and consumers with a view to introducing a requirement on every mortgage lender to disclose the basis on which they have calculated the repayment ability of their customers.
"Our job is to promote the soundness of the financial institutions and the protection of their customers," said Mr Liam O'Reilly, chief executive of IFSRA. "It is important that institutions should only advance loans that are fully suited to their customers' circumstances."
Mr O'Reilly said that while the mortgage lending study is now completed, IFSRA will continue to monitor lending practices closely and will begin another round of "stress-testing exercises" on the lending institutions as part of its ongoing work.
The Irish Bankers' Federation (IBF) and its affiliate, the Irish Mortgage Council (IMC), said they welcomed the overall findings of the mortgage lending study.In a joint statement, they said:
"The IBF and IMC welcome in particular IFSRA's finding that no matters have come to light that raise questions of financial soundness, thus confirming that lenders have not been over-extending themselves in the mortgage market overall.
"The IBF and IMC also welcome the continuing emphasis on ensuring that loans are properly secured and will be repaid in full. The IBF and IMC support this on-going approach as being in the interests of borrowers and lenders alike."