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Irish central bank leaves mortgage-lending limits unchanged

Offices in the Central Bank of Ireland are seen in the financial district in Dublin

DUBLIN (Reuters) - Ireland's central bank will leave its mortgage-lending limits unchanged for the second straight year in 2020, saying on Wednesday that the measures have been effective in keeping house prices from climbing significantly higher.

The central bank introduced limits in 2015 capping how much banks can lend for the purchase of a home relative to its value and the borrowers' income, in a bid to prevent any repeat of the excessive lending that devastated the economy a decade ago.

Some banks had hoped the regulator would ease the rules in its annual review. The central bank did announce that it would not force local lenders to hold more capital under two buffers it levies on them - the countercyclical capital buffer (CCyB) and Other Systemically Important Institutions (O-SIIs).

Under the O-SIIs, banks identified as systemically important to the domestic economy because of their size and market share must hold additional capital. Barclays <BARC.L> and Bank of America <BAC.N> were designated as O-SIIs for the first time on Wednesday after they moved significant operations to Ireland as a result of Brexit.

The bank's Irish subsidiaries will have to set aside 0.75% of risk-weighted assets. UniCredit and Depfa Bank's Irish units are no longer designated as O-SIIs, the central bank said.

On the mortgage rules, research from the bank suggested that without the rules the average price of a house might have been 15% to 25% higher at the end of March.

Having shot up from 2013 to 2018 following a property crash, annual price growth around the country slowed to 1.1% in September, the lowest rate in more than six years, broadly in line with the rate of inflation in the economy, with prices 1.3% lower in Dublin.

While house prices are 17% below the unsustainable 2007 peak, rents long overshot that mark as housing supply struggled to get going, making it hard for prospective buyers to meet the central bank's deposit demands.

Under the rules, mortgages are subject to an 80% loan-to-value (LTV) limit for those buying for the second time. First-time buyers can borrow 90% of the cost of a home.

A loan to income (LTI) limit restricts the amount of money a prospective buyer can borrow to a maximum of 3.5 times gross income, so a couple with a combined income of 100,000 euros can borrow up to a maximum of 350,000 euros.

Banks can also make a limited amount of exceptions.

(Reporting by Padraic Halpin, editing by Larry King)