banks and also enacts borrower - based measures to mitigate the risks associated with boom - bust financial cycles. we view our mortgage measures that put ceilings on loan - to - income ( lti ) and loan - to - value ( ltv ) ratios as essential in limiting systemic financial risk, while acting to protect consumers from the risks associated with overborrowing. it is critically important to appreciate that our framework sets limits on the size of mortgages : the lti and ltv ratios are not targets but ceilings. in buying a home, a household should take into account the protections offered by putting down a higher deposit in terms of limiting repayment burden and risks associated with excessive debt levels. equally, lenders are required to assess the loan - bearing capacity of each mortgage customer and restrict the size of the mortgage if indicated by the analysis of the borrower ’ s credit risk. while the november 2016 revisions to the mortgage rules do raise the maximum loan size for first - time buyers seeking to buy homes above €220, 000 in value, it is important to take into account several considerations. first, borrowers also have to satisfy the lti requirement, which remains unchanged at a cap on loans of 3. 5 times income. for many households, this will limit the capacity to increase the mortgage size. second, to the extent that the revisions lead to an increase in aggregate mortgage credit volumes, this should be interpreted in the context of the subdued level of lending in the aftermath of the crisis. third, our framework is designed to avoid spiral dynamics between house prices and credit volumes. since the mortgage measures were initially flagged in late 2014, there has been a sharp moderation in expectations for annual gains in house prices, since it is widely understood that persistently - high rates of increase in house prices are not likely in a system in which measures place ceilings on lti and ltv ratios. in particular, the lti rule limits the capacity of house prices to grow too quickly relative to income levels, while the 80 percent ltv ceiling on loans taken out by second and subsequent buyers attenuates the feedback loop by which rising house prices increase the capacity of existing home owners to increase leverage. furthermore, our macroprudential regulations can be tightened if there is emerging evidence of elevated risks in the mortgage market, especially in relation to the rate of credit growth. finally, it is important to appreciate that many factors influence the dynamics of house prices. while rising incomes typically

philip r lane : prospects for the irish economy speech by mr philip r lane, governor of the central bank of ireland, at the cork chamber of commerce, cork, 23 february 2017. * * * acknowledgements : i thank john flynn and terry quinn for their inputs into this speech. good afternoon. it is a pleasure to have the opportunity to address the cork chamber of commerce. today, i want to focus on the prospects for the irish economy. first, i will give an overview of our latest projections for the economy. next, i will discuss some external challenges facing the economy. finally, i will turn to the role played by our macroprudential mortgage measures in underpinning macro - financial stability. the irish economy : current developments the highly - globalised nature of the irish economy and the impact of the activities of foreign multinational firms on the headline national accounts mean that it is necessary to look at a range of domestically - focused spending and activity indicators to get a more accurate measure of the level and composition of activity in the domestic economy. 1 the evidence from indicators such as employment, consumer spending and a suitably - adjusted measure of investment is that economic activity continues to grow at a significant pace. the recovery of the economy in recent years has been led by the strength of domestic demand. this has been supported by the combination of relatively strong and broad - based growth in employment, increasing real disposable incomes and more favourable financial conditions. since the low point reached in 2012, employment has grown by over 200, 000, at an average annual rate of almost 2. 5 per cent. employment growth has been broadly based across the private sector and has predominantly reflected growth in full - time employment. this has helped incomes to recover and has supported strong growth in consumption in recent years, with per capita consumption moving back towards its pre - crisis peak. 2 the impact of the economic crisis in the south west region ( including cork ) and the subsequent recovery has been broadly similar to the national experience. employment declined by 16 per cent nationally, which was also the scale of the decline in the south west region. since then, both nationally and in the south west, about two - thirds of jobs lost in the crisis have been recovered. however, unemployment at just under 7 per cent nationally and slightly below 6 per cent in the south west remains above pre - crisis levels. in many ways, the economy of the cork region mirrors the national economy, having both significant multinational and domestic components. cork is