Brendan Burgess
Founder
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If the objective of this proposal is to protect the banks, then the 15% exemption for LTVs in excess of 80% should apply to the entire book.
Here is the Central Bank rationale for applying it to new business
If they are trying to control new reckless lending pushing up house prices, then it should apply to new lending only.
If they were to apply it to the whole book, there would be no exceptions to the 80% LTV rule for some time as I imagine a good part of the book is already over the 80% LTV ratio.
Here is the Central Bank rationale for applying it to new business
If the chief concern is the stability of the banking system, surely the 15% exemption should apply to the whole book?[FONT="]Rationale for a proportionate cap[/FONT]
[FONT="]LTV and LTI caps can be introduced
[/FONT]
- [FONT="] across the existing loan book (mainly in countries where amortisation of mortgages is slower),
[/FONT]- [FONT="]on new lending,
[/FONT]- [FONT="]or on a proportion of new lending (a proportionate cap).[/FONT]
[FONT="]A proportionate cap involves restricting lenders’ new residential mortgage lending at LTV / LTI ratios of over a certain level to no more than a certain per cent of new residential mortgage lending. The benefit of a proportionate cap is that it recognises that high LTV and high LTI lending can be appropriate in certain circumstances. Examples could include otherwise very creditworthy borrowers who cannot raise the deposit required but who would be able to afford the loan servicing, or younger borrowers whose income can reasonably be expected to rise in the future.[/FONT]
If they are trying to control new reckless lending pushing up house prices, then it should apply to new lending only.
If they were to apply it to the whole book, there would be no exceptions to the 80% LTV rule for some time as I imagine a good part of the book is already over the 80% LTV ratio.