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There’s a funny thing about mortgage regulation: everybody pretends it’s about prudence, right up until prudence starts looking a lot like paralysis – and the prudence/paralysis matrix in Ireland has been done to damn near perfection at this point. It’s no wonder that the government are thinking of giving themselves an exemption to our planning laws in order to get IPAS centres built (even though they already have preferential planning treatment).
Monkey see, monkey do.
That seems to be what is happening in Britain now. The FCA and PRA are consulting on permanently scrapping the lender-by-lender 15% cap on high loan-to-income lending. Instead of saying each bank must stay boxed into the same narrow corner, the regulators want to keep an eye on risk at aggregate level across the market while allowing individual lenders a bit more room to actually do the job and lend. The stated aim is to ‘preserve resilience while improving access for otherwise creditworthy borrowers, especially first-time buyers’. They also explicitly say it could widen product choice, improve competition, support homeownership and even help housebuilding.
Now, let’s be honest about what this really means.
It means the British regulators have looked at the market and realised something obvious: when you place overly rigid limits on lending, you don’t abolish housing demand, you merely bottle it up. You don’t make homes cheaper by pretending a solvent person on a decent upward earnings path is somehow reckless because they need to borrow at a higher multiple. You just delay household formation, prolong renting, and push ownership further out of reach. This is precisely the point we were making in 2014 when we gave our submission to the Central Bank on this topic – and we were a loan voice on how silly it was at the time (feeling vindicated now!).
And that matters because first-time buyers are not some abstract policy category. They are the people paying somebody else’s mortgage while being told by respectable society that they haven’t demonstrated “affordability”. In Britain, the PRA noted first-time buyers made up 54% of all high-LTI lending in Q2 2025. That tells you the whole story. The higher-multiple borrower is often not a cowboy. Quite often it’s simply the person trying to buy their first home in a market where wages and house prices have parted company.
Managed decline…
The British proposal isn’t a free-for-all, nor should it be described that way by the usual nervous types (who may I add, are often homeowners themselves who seem happy enough to pull the ladder up after themselves!). Regulators still want lenders to act prudently, monitor risk segments, maintain board oversight and, if necessary, reduce volumes. The point is not to abandon standards. The point is to stop confusing crude rules with intelligent regulation.
That is where Ireland should be paying attention.
Because in Ireland we still operate with fairly blunt loan-to-income limits: 4 times gross income for first-time buyers and 3.5 times for second and subsequent buyers, alongside a 10% minimum deposit for owner-occupiers. Yes, lenders have allowances above those limits, but the system is still fundamentally one of hard numerical guardrails, introduced in 2015 and now a permanent feature of the market. The Central Bank’s own description is that these measures exist to prevent an unsustainable relationship between credit and house prices.
That sounds wise, and in part it is. Ireland earned the right to be cautious after the last crash. We had a genuine credit binge, and anybody who lived through it should have a healthy suspicion of easy money dressed up as social progress, I still look back on those days with trepidation, it was a $h1t show. The post-2015 rules helped stop a return to the lunacy, but replaced it with a different type of evangelical madness. Even the Central Bank points to the resilience of loans originated under the mortgage measures – resilience is good, but locking people out of access to homeownership is not, and the trade off of some people losing homes in order to help more is probably worth it, but we can’t know because caution has turned into dogma.
Caution can age into dogma.
The issue in Ireland today is not that we are drowning in reckless credit. The issue is that we are starving a supply-constrained market of flexibility while pretending this is the same thing as prudence. The Central Bank itself says loan-to-income has been the predominant tool determining credit volumes for the vast majority of borrowers, and that first-time buyers in Ireland have lower risk and stronger income-growth potential over the life of the loan.
Read that again.
If first-time buyers are lower risk, and if the LTI rule is the thing doing most of the constraining, then we need to stop acting like every discussion about loosening that rule is heresy. Britain appears willing to accept that some borrowers can safely sustain higher multiples and that lenders should have room to compete for that business. Ireland still behaves like policy must be calibrated for the worst borrower in the room.
Why aren’t we doing this in Ireland?
Because Irish housing policy has a bad habit of treating symptoms as causes. We are a nation that gets a fever and then blames the thermometer. We know supply is the dominant problem, but because supply is politically hard, slow, expensive and embarrassing, we default to managing access instead. It is easier to cap borrowers than to build homes. Easier to lecture people on prudence than to admit the market is structurally undersupplied. Easier to defend a rule than to fix a system.
There is also institutional memory at work. Irish regulators remember the crash, and fair enough. But memory can become overcorrection. The lesson of 2008 was not that higher multiples are always evil. The lesson was that bad underwriting, poor supervision, speculative excess and a construction-credit bubble are evil. Those are not the same thing.
Getting it juuuuuust right.
And then there is the quiet politics of it all. If Ireland loosened high-LTI lending without visibly solving supply, the immediate criticism would be obvious: “you’re just helping prices go up”. There is truth in that risk. Extra credit in a supply-starved market can capitalise into higher prices. But that is not an argument for permanent rigidity. It is an argument for pairing smarter credit policy with an actual building strategy, which is precisely the kind of joined-up thinking we rarely manage.
So my criticism is not that Ireland should simply copy Britain tomorrow morning and open the taps.
It is that we are still too fond of one-size-fits-all mortgage thinking in a market that clearly doesn’t fit one size. If a lender can demonstrate prudent underwriting, strong stress testing, proper governance and sensible concentration controls, then why should an otherwise solid first-time buyer be excluded merely because a formula says “computer says no”? Britain, for all its own housing dysfunction, seems willing to ask that question.
Ireland still seems more comfortable avoiding it. And that’s the real problem. Not caution. Not prudence. Not macroprudential policy as such. The problem is when a tool designed to stop a bubble becomes a doctrine that stops mobility, delays ownership and entrenches a status quo where renters prove affordability every month, only to be told they haven’t proven it enough.
Oh, and while the Central Bank like to take credit for the fact that the macroprudential rules ‘work’, one of the things they tacitly claimed was that they would stop house prices from going bonkers, and guess what? They didn’t.
They just made sure lots of people couldn’t buy homes. That’s not stability. That’s just a more respectable form of gridlock.
