The Central Bank has proposed new restrictions on how much banks can lend to home buyers in an effort to reduce the risk of a new property bubble forming as prices recover rapidly from the property crash.
The bank said it was appropriate to bring in limits on new lending at high loan-to-value (LTV) or loan-to-income (LTI) ratios as house prices in Dublin jumped by 25% in the year to August.
Today's proposed measures will require banks to restrict lending above 80% of the value of a home to no more than 15% of the aggregate value of all housing loans.
They will also restrict lending above three and a half times the borrower's income to no more than 20% of that aggregate value.
The proposals are contained in a consultation paper and banks have until December 8 to respond to them.
The measures also include a lower threshold for buy-to-let properties.
They require banks to limit loans of over 70% of the value of investment properties to 10% of all buy-to-let loans.
The head of financial regulation at the Central Bank, Cyril Roux, said there was concern that the market was getting back to a place where some borrowers were taking out loans where their ability to repay was tenuous.
"These measures have been carefully considered and, taking past experience into account, are being introduced at an appropriate time to ensure borrowers and lenders can withstand potential economic or property market shocks in the future without financial distress," Mr Roux said.
Mr Roux said the new measures are not intended to replace lenders' own risk management practices, but rather they should reinforce and strengthen the existing risk mitigation practices used to ensure prudent lending.
Stefan Gerlach, the Central Bank's deputy director, said the measures were not aimed at limiting or steering prices but would probably have an impact on the pace of price increases.
He said the main objective of the new measures is to increase the resilience of the banking and household sectors to the property market.
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