THERE has been a drop in the number of people who got an exemption from strict Central Bank lending rules to help them buy a home last year.

Lenders can allow a small number of exemptions from the rules.

Getting an exemption is often popular for younger mortgage applicants seeking to buy urban homes, where prices often exceed what people are allowed to borrow.

But the impact of the pandemic meant that just 13pc of borrowers were able to get an exemption to the rules from their lender last year.

This works out at one in eight buyers getting an exemption to the rules in 2020.

The Central Bank figures show that in 2018 and 2019 around 17pc of borrowers got an opt-out to the lending limits. This works out at around one in six borrowers.

Exemptions to the strict Central Bank lending rules were paused for much of last year due to the uncertainty in the mortgage market brought on by Covid-19 pandemic.

The limits state that, without an exemption, people cannot borrow more than 3.5 times their income.

Lenders can exceed this limit for up to 20pc of their lending book to first-time buyers, and up to 10pc for second or subsequent buyers.

The rules also state that first-time buyers have to have a deposit of at least 10pc of the property’s value.

Data from the Central Bank found that first-time buyers and second-time buyers getting an exemption were more likely to be single applicants and purchasing in Dublin.

The average purchase price for a first-time buyer in Dublin, who has an exemption, was €427,000 last year.

This compared with property value of €378,000 for a typical first-time buyer who has no exemption.

Those with an exemption tend to be two to four years younger on average than other borrowers, and tend to use a broker rather than directly dealing with the lender.

First-time buyers who got an exemption last year were also more likely to be buying a newly-built home, the Central Bank said.

More then half of all allowances are allocated to Dublin buyers.

This contrasts with a situation where around a third of all new lending took place in Dublin last year.

A further 26pc of exemption lending is originated in Leinster, excluding Dublin.

Typically those first-time buyers getting an exemption from the income limit have an annual income of €87,500.

Those without an allowance to exceed the income limit had a typical income of €97,000.

Buyers with an income limit exemption were typically 33, compared with 35 for those who did not need an exemption.

In both cases, most are joint applicants.

The Central Bank said: “Allowance lending fell at the onset of the pandemic before stabilising at a lower level for the remainder of 2020.”

It said three out of four of those getting an exemption were in Dublin or Leinster.

Dublin borrowers with a loan-to-income allowance borrowed larger loan amounts to purchase more expensive properties on lower average incomes, than those without an allowance.

The findings come as a surge in loan applications means that most lenders have already shut off the option of borrowers getting an exemption this year, as they have used up their allocations.

Broker Karl Deeter said only the two large banks, AIB and Bank of Ireland, were offering exemptions to first-time buyers, with Finance Ireland offering them to new buyers on a case-by-case basis.