Bridging finance can provide the funds needed to purchase a new home without waiting for the sale of a previous one. Where such finance is secured on a residential property, it is subject to the Central Bank’s mortgage lending rules.
Within the measures, a principal home bridging loan is a short-term loan (with a maximum term of 18 months) that allows existing homeowners to purchase a new principal home before completing the sale of their current property. Unlike standard mortgages, these loans are repaid from the proceeds of the original property sale rather than from regular income. In addition, there is no requirement to make capital repayments during the term.
Following a consultation process with industry and civil society stakeholders, the Central Bank of Ireland last April introduced a targeted amendment to the mortgage measures to exempt certain principal home bridging loans from a loan-to-income (LTI) limit. A loan-to-value (LTV) limit continues to apply to these products. All other elements of the mortgage measures remain unchanged. The Central Bank has advised that the operation of the exemption will be monitored as part of the Central Bank’s regular assessment activities.
The mortgage measures do not aim to replace lenders’ own underwriting criteria. Lenders continue to assess the suitability and affordability of bridging loans for individual borrowers. Consumer protection rules also apply in full to these products. Borrowers must be fully informed of the risks, and lenders must ensure that bridging finance is appropriate for each customer's circumstances.
The decision of whether or not to provide bridging finance in any particular circumstance including for homeowners who have secured planning permission to build a new home before selling their existing property and the setting of the interest rate for such finance is ultimately a commercial matter for individual lenders. Neither the Central Bank nor I, as Minister for Finance, have a role in or should become involved in such decisions.
My Department regularly engages with the Central Bank of Ireland on a range of matters including bridging finance and my officials will continue to work closely with relevant stakeholders in relation to this matter.
