Central Bank to limit amount banks lend for home purchase

Michael D Not Higgins

OMD wrote: »

Average pay in Ireland is just under €44,000 for a full time worker. (39 hours a week) I wouldn't rely on Wikipedia.

COLOR="Blue"]citation needed[/COLOR

desertcircus

Someone on a little over 30k will be taking home in the region of 2k per month. To break down how to save on that salary:

1. Find a place to live that's within five or ten kilometres of work and available for a maximum of 600 a month per room (I doubt there's a single place of employment in the country that doesn't have a 1200pm two-bed within ten kilometres). Split the rent with a housemate.
2. Buy a bicycle on the Bike To Work scheme; if you max it out, you'll be faced with a 700 quid bill, which many employers can spread over a year. This is a once-off expenditure - running costs are close to zero for a bike.
3. Get into the habit of making your own lunches for work - this should cost about a tenner a week at most. If you eat porridge for breakfast as well, your breakfast costs will be so low as to be barely worth measuring on a weekly basis. Learn to cook three or four simple dishes that freeze well; they'll work out at maybe thirty quid a week to make five days' worth.

At this point, your monthly running costs are 600 for rent and about 160 for food. Add twenty quid a month for household bits and pieces, and 120 for bills (basic mobile package plus your share of electricity, broadband, heating and water). So far, our basic living costs are running at about 900 euro. So far so good, except living on that basic a budget is depressingly constrained. Mark a hundred and fifty a month for replacing electronics, clothes and bike parts (this is admittedly pretty generous and will cover a 600-quid laptop, a 300-quid tablet, hundred-quid headphones, five hundred a year on clothes and 300 on bike repairs - you could almost certainly do it on a flat hundred). Then we have discretionary spending: the stuff that makes life more than a process of getting by. Set aside 70 a week, or 320 a month, for a cinema visit, a meal or two out and a few pints. Where does that leave us? We're now spending about 1,400 a month. The last addition: a hundred a month set aside for a nice holiday, which should allow someone to save five hundred euro a month. Six thousand euro a year is a pretty generous amount of savings.

D3PO

Volvic12 wrote: »

Lets say on above case, take home pay is around 2000. Cost of living has gone up in Dublin. Quite expensive to get by. House share at 500 a month (low) plus travel plus bills - comes to about 600 (being conservative - probably closer to 700). That leaves 1400 for rest of month etc. Food - 100 per week. Left with a thousand per month max. So now you look at clothes - if you are working you will need to invest in this - especially if looking to advance - shirts, suits, dresses - whatever you require. Obviously other expenses to consider - you have to live some life. Ridiculous comment above "if you dont want to house share and would rather shell out 1400 a month in rent and go on the piss every saturday night thats your own choice but you cant then complain that you cant save". Not all people in their 20s do this. But there are other expenses - gym, attending sport events etc. Stop preaching from your high horse and get in touch with reality.

How much exactly are you meant to save per month given that a €300,000 house would require a saving of €60,000.

Look, maybe you're right. Maybe you should have to save 10/15 years before you can purchase a house. I just think it's wrong that the people bringing in this policy are the ones that are going home to their own houses this evening (in the majority of cases).

get in touch with reality. Erm I am in reality you though are not.

Firslty who spends 100 a week on food ? Myself and my wife plus our child spend less than that including nappies etc. anybody spending 100 a week on food for themself is the one not in reality

clothes for work, shirts can be bought for 10 euro you dont need to be buying hugo boss fare or the likes.

People can put as many obsticles in their way as they want. The fact is if you want to save a deposit you can do it. If you want something to be handed to you on a plate you can come on here complaining about how unfair things are.

D3PO

Volvic12 wrote: »

€14 a day for a single person for breakfast, lunch and dinner I don't think is unreasonable?
Especially if you want to eat healthy.

:D:D thats all i can say.

Yes if you want to get your latte on the way to the office and buy food in the canteen etc etc.

You can eat very well and very healthy by doing a large supermarket shop in an aldi or lidl and for a single person do that for about 60 quid a week.

ridiculous kind fo post you would expect to get form somebody who wants to find excuses for not being able to save money,

OMD

Cuddlesworth wrote: »

Are you sure that's not average household income?

"On average individuals in the Republic of Ireland have an annual gross income of €26,800"

"The average household has a disposable income of just under €46,000"

Yes I'm sure.
http://www.cso.ie/quicktables/GetQuickTables.aspx?FileName=EHQ03.asp&TableName=Earnings+and+Labour+Costs&StatisticalProduct=DB_EH

Multiply hourly rate €21.63 by 39 hours and 52 weeks a year for average pay for a full time worker.
Obviously the average number of hours worked in Ireland is less than 39. This is misleading as the average worker is full time.

desertcircus

OMD wrote: »

Yes I'm sure.
http://www.cso.ie/quicktables/GetQuickTables.aspx?FileName=EHQ03.asp&TableName=Earnings+and+Labour+Costs&StatisticalProduct=DB_EH

Multiply hourly rate €21.63 by 39 hours and 52 weeks a year for average pay for a full time worker.
Obviously the average number of hours worked in Ireland is less than 39. This is misleading as the average worker is full time.

But that table already gives average weekly earnings of 688, which gives a far smaller average figure.

MouseTail

desertcircus wrote: »

But that table already gives average weekly earnings of 688, which gives a far smaller average figure.

That 688 figure includes part time workers.

ffactj

You are saving for a deposit on a 300k house and were hoping to buy next year and you have 25k of a 30k saved.
You are paying rent of €1000PM

New rule comes in

Now you need €60k for a deposit.
Now you save as much as you can. So for the next 5 years you are paying €1000PM in rent and saving like mad.

You have your €60k deposit together after 5 years and can buy a €300k house.

Your landlord in that time got €60000 from you in rent.
The tax man got €30000 of that. Well done tax man.

Stamp duty has probably gone up in the meantime.
Would prices for houses be lower in 5 years time, even with measures? I doubt it, but you can hope.

D3PO

ffactj wrote: »

You are saving for a deposit on a 300k house and were hoping to buy next year and you have 25k of a 30k saved.
You are paying rent of €1000PM

New rule comes in

Now you need €60k for a deposit.
Now you save as much as you can. So for the next 5 years you are paying €1000PM in rent and saving like mad.

You have your €60k deposit together after 5 years and can buy a €300k house.

Your landlord in that time got €60000 from you in rent.
The tax man got €30000 of that. Well done tax man.

Stamp duty has probably gone up in the meantime.
Would prices for houses be lower in 5 years time, even with measures? I doubt it, but you can hope.

except if you can only save 500 a month ontop of 1000 in rent you cant and never could afford a house for 300k anyway...

ffactj

D3PO wrote: »

except if you can only save 500 a month ontop of 1000 in rent you cant and never could afford a house for 300k anyway...

Just an example.
There will be different priced houses, different amounts of time needed to save etc.
Everybody is different.

The point being, everybody but the FTB is going to gain from the new longer wait.

howtolive

D3PO wrote: »

think its actually 1x so perhaps for the point of illustration I've gone OTT but I think my point is understood.

Hi, sorry to butt in - on the various news reports I can't find mention that the new rules are 3.5x primary earner + 1x secondary earner for income multiple restrictions - is it not 3.5x combined gross salary or am I missing something?

Thanks.

Potatoeman

howtolive wrote: »

Hi, sorry to butt in - on the various news reports I can't find mention that the new rules are 3.5x primary earner + 1x secondary earner for income multiple restrictions - is it not 3.5x combined gross salary or am I missing something?

Thanks.

Kid mean one person might leave the work force so it's not factored as a constant income.

Hollister11

Just want to ask a question. I only started studying computer science I'm college.
If say in 10 years so say 5 years experiences I want to marry and settle down. Possibly on 50k my mortgage would be 175k. That wouldn't get you a very nice house today. Would the prices drop heavily

handlemaster

I think this new requirement will bring up the lower end of the market un Dublin. Any thing under 200k will rise up quickly

Larry Wildman

handlemaster wrote: »

I think this new requirement will bring up the lower end of the market un Dublin. Any thing under 200k will rise up quickly

Very strong candidates will still get 90% mortgages. The banks will just be able to cherry-pick those customers and probably lock them in with other ancillary services like pensions and investments.

howtolive

Potatoeman wrote: »

Kid mean one person might leave the work force so it's not factored as a constant income.

True but anything I've been told so far is that banks look at your current scenario, not that you may possibly have a kid in the future? Do the CB decisions change this to the 3.5x and 1x mortgage alluded to?

pobber1

howtolive wrote: »

True but anything I've been told so far is that banks look at your current scenario, not that you may possibly have a kid in the future? Do the CB decisions change this to the 3.5x and 1x mortgage alluded to?

The report doesn't seem to specify if the LTI limit is 3.5x combined or single income.

From the report (bottom of page 22)
"The Central Bank considers a limit of 3.5 times loan to gross annual income as a
reasonable level for a LTI limit"

D3PO

Hollister11 wrote: »

Just want to ask a question. I only started studying computer science I'm college.
If say in 10 years so say 5 years experiences I want to marry and settle down. Possibly on 50k my mortgage would be 175k. That wouldn't get you a very nice house today. Would the prices drop heavily

That would assume that both your wife to be doesnt work and that you only save 7k a year. plus u havent accounted ffor the deposit on top of the 3.5x salary

a single person on 50k a year who wants to buy a nicer house should be able to save more than 500 and change a month when they have a take home of about 2800.

if you chose to start a 1 salary family then you do so knowing the implicatios it would have to you.

Lucy B

Larry Wildman wrote: »

Very strong candidates will still get 90% mortgages. The banks will just be able to cherry-pick those customers and probably lock them in with other ancillary services like pensions and investments.

Who will these people be do you think? We are doing all that we are meant to be doing, everything perfect, just that we will have 10% deposit.

mariaalice

Lucy B wrote: »

Who will these people be do you think? We are doing all that we are meant to be doing, everything perfect, just that we will have 10% deposit.

I think it will come down to the type of employment you have, that does not mean public servants will be looked at more favourable, the realities of life are that some careers are more stable and better paid that others.

Ethan.Saaris

Is this happening in Dublin only, all the whole ROI? I'm specifically interested in Cork.

Michael D Not Higgins

Ethan.Saaris wrote: »

Is this happening in Dublin only, all the whole ROI? I'm specifically interested in Cork.

All of Ireland

Ethan.Saaris

Michael D Not Higgins wrote: »

All of Ireland

I thought so. It would not be wise to rush now and see what happens next year.

I'm interested in getting a house in Cork, hence my interest.

Geuze

Cuddlesworth wrote: »

Are you sure that's not average household income?

"On average individuals in the Republic of Ireland have an annual gross income of €26,800"

"The average household has a disposable income of just under €46,000"

Always look to CSO.

aVERAGE EARNINGS ARE 36k approx.

See here:

http://www.cso.ie/en/releasesandpublications/er/elcq/earningsandlabourcostsq12014finalq22014preliminaryestimates/#.VDfR4_ldWSo

688 per week is average earnings.

In two sectors, average earnings are over 1,000 pw.

Geuze

Cuddlesworth wrote: »

Are you sure that's not average household income?

"On average individuals in the Republic of Ireland have an annual gross income of €26,800"

"The average household has a disposable income of just under €46,000"

Average household income.

See here:

http://www.cso.ie/en/media/csoie/releasespublications/documents/silc/2012/silc_2012.pdf

Mean

52,265 pa per hh in 2012 = gross

Disposable = 40,505


Median

2012 gross per hh = 37,395

Disposable = 33,113

Mongfinder General

This is all talk and bluster. If the Central Bank issues guidance on this then that's is all it is, guidance. It is not the law. If the Central Bank issues rules and regulations then it will need enabling powers to do so (probably already there in extant legislation). These will then need to be enforced. Are they going to pick through every loan. What about the deposits. Are they going to check other sneaky credit union/credit card/personal loans used to float a deposit

The Central Bank is talking tough but realistically, what can it do to punish misbehaving banks. Sanctions I hear you say. What would be the point in fining a Bank owned by the public. None.

The_Conductor

OMD wrote: »

Yes I'm sure.
http://www.cso.ie/quicktables/GetQuickTables.aspx?FileName=EHQ03.asp&TableName=Earnings+and+Labour+Costs&StatisticalProduct=DB_EH

Multiply hourly rate €21.63 by 39 hours and 52 weeks a year for average pay for a full time worker.
Obviously the average number of hours worked in Ireland is less than 39. This is misleading as the average worker is full time.

The average employee is paid for 31 hours employment per week- not 39.
The average pay, exclusive of bonuses- which no-one relies on- is 20.62
The average gross pay is in the region of 640 Euro per week (gross, not net).

The 'average' worker is not a fulltime, 39 hour week employee- the 'average' worker is the aforementioned 31 hours per week. This is according to the CSO- and is not my interpretation of their figures.

If you're going to quote statistics from a reputable source- such as the CSO- having an understanding of the statistics would probably be helpful- and if you don't have an understanding of them- quote them directly- don't try to interpret or extrapolate from them- you're only going to get into trouble.

The_Conductor

Mongfinder General wrote: »

This is all talk and bluster. If the Central Bank issues guidance on this then that's is all it is, guidance. It is not the law. If the Central Bank issues rules and regulations then it will need enabling powers to do so (probably already there in extant legislation). These will then need to be enforced. Are they going to pick through every loan. What about the deposits. Are they going to check other sneaky credit union/credit card/personal loans used to float a deposit

The Central Bank is talking tough but realistically, what can it do to punish misbehaving banks. Sanctions I hear you say. What would be the point in fining a Bank owned by the public. None.

The are rules that are to come in from the 1st of January.
They are being brought in through new regulations, with a commencement date of the 1st of January.

At the moment the regulation is in DRAFT format- and issued to financial institutions and other interested bodies, for consultation, with a 2 month consultative process.

It is envisaged that after the report of the 26th comes out- there isn't going to be any meaningful dissent from the industry.

Mongfinder General

Mongfinder General wrote: »

This is all talk and bluster. If the Central Bank issues guidance on this then that's is all it is, guidance. It is not the law. If the Central Bank issues rules and regulations then it will need enabling powers to do so (probably already there in extant legislation). These will then need to be enforced. Are they going to pick through every loan. What about the deposits. Are they going to check other sneaky credit union/credit card/personal loans used to float a deposit

The Central Bank is talking tough but realistically, what can it do to punish misbehaving banks. Sanctions I hear you say. What would be the point in fining a Bank owned by the public. None.

We're not used to the financial regulator regulating but that is what is now happening.

As the Central Bank explains, the game has changed since the crisis. We're into shared supervision now because if one eurozone country makes a mess of things, it's bad news for everyone.

Interesting document by one of the new supervisory bodies (the ESRB) highlights the value of LTV/LTI mortgage lending limits. As it says, this is an area where national regulators are responsible, emphasising the need for 'policy coordination'.

Translation: they can't physically make the rules for everyone in this particular area so they'll describe what they see as prudent and everyone can 'coordinate' based on that.

assetcolum

El_Dangeroso wrote: »

This is great news, it's nice to see the CB finally take steps to ensure a long term sustainable property market.

I am someone who is affected by this, I have plans to buy in early 2015.

What people don't realise is that the property market has two types of buyers at the moment. Investment cash-rich landlords and FTB. Very few trader-uppers due to people not wanting to sacrifice their tracker.

Investors are not seeing great returns anymore, so are slowly tapering off. This leaves the FTB to form the majority of those bidding.

People need to understand that increased lending just means one thing, increased prices.

I'll need to save a bit longer, but at least I know when I do get around to buying, I won't be competing against people borrowing more than they should pushing up the price.

FTB myself have 100k there but i'll probably need another 20k

I completely agree with your post, well said it's about time these rules came into play

Atleast now the hard working people who saved a deposit won't have to get into a fake bidding war that was mostly driven by credit /greed