Speaking to reporters after the regulator decided to allow first-time buyers to borrow more based on their income and subsequent buyers to take on a loan with a lower deposit, Mr Makhlouf acknowledged that the relaxation would, “all else being equal”, lead to a “modest increase” in property prices.
The governor did add that "certainly will play a part in reducing housing prices" are other variables, such as rising interest rates and rising cost of living.
According to the Central Statistics Office, home prices in the State were rising at an annual rate of 12.2% as of August as demand outpaced supply. In contrast, general consumer price inflation was 8.2% last month due to rising gasoline and food prices (CSO).
The lending limits, according to Mr. Makhlouf, are "guardrails" against risky lending and borrowing, but they do not take the role of all parties to a mortgage having to responsibly determine if the loan can be repaid.
"The biggest financial choice somebody makes in their lifetime is typically buying a home and getting a mortgage. Individuals, households, and lenders must carefully consider, when making a decision, not only whether they can afford to buy the house today but also if they will be able to afford to pay a mortgage over the course of the next 30 years.
"It is not the role of the Central Bank to actually make that choice for people. Our responsibility is to ensure that the regulations are in place and serve as guardrails, beyond which we consider the dangers to be excessive.
"We wouldn't have done it if I thought the timing was off to [change the rules], " Mr. Makhlouf continued. Whatever the economy's conditions, these regulations must be in effect.
First-time buyers will be permitted to borrow up to four times their salary under the new regulations, up from the existing 3.5 times, as of January. The regulator will keep enforcing a 3.5 times income cap on most loans to second- and subsequent-time homebuyers.
Most second and subsequent buyers were previously needed by the regulator to put down a 20% deposit against a house in order to receive a loan, but it has now opted to reduce this to 10% in order to be consistent with its demand for first-time buyers.
According to the Central Bank, lenders will soon be given permission to lend 15% more than what is allowed for owner-occupiers, which represents a streamlining of the current exemptions that apply to various borrower categories. The loan-to-deposit ratio will stay at 70% for buy-to-let loans with a maximum of 90%.
The conclusion of the rule review, which started in May of last year, comes as some lenders are tightening their own mortgage lending requirements due to the cost-of-living problem and rising interest rates.
While Mr. Makhlouf claimed that the mortgage regulations, put in place by the Central Bank in 2015 following Europe's worst housing crash, have improved borrowers', lenders', and the economy's resilience over the past seven years, he also pointed out that this has come at a price, one felt most keenly by prospective first-time buyers.
According to him, "our listening and public engagement have made clear to us the ways in which these costs are felt in people's lives, and has played a valuable role in helping us arrive at a targeted recalibration that balances the trade-off between allowing somewhat greater risk into the system, against an alleviation of some of the costs of the policy."
According to data by the Central Bank, the proportion of renters who can afford a three-bedroom semi-detached home in Dublin at the most recent estimated build price has decreased since 2015. According to the report, raising the first-time homebuyer mortgage cap to four times income "would increase the share with predicted viable demand to roughly the level witnessed in 2015".
Builders had argued that loosening the regulations would increase supply in the market and make some residential projects more financially viable, but Mark Cassidy, a senior economist with the regulator, claimed that this would be countered by the impact of currently rising construction costs and interest rates.
According to Joey Sheahan, head of credit at online mortgage broker MyMortgages, the income restriction for first-time buyers has been loosened, allowing couples earning a combined income of €80,000 to borrow €320,000 as opposed to the previous maximum of €28,000.
This should significantly impact the many people attempting to purchase their first house, he said. For the many second-time purchasers who are unable to save the requisite 20% down payment, allowing them to get a mortgage based on a 10% deposit will be a much-needed relief.
Additionally, the Central Bank has expanded the definition of a first-time buyer to include debtors who are separated, divorced, declared insolvent, or have filed for bankruptcy and no longer have a stake in their prior property.
