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Central Bank to limit amount banks lend for home purchase

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    #842
    Eldarion
    Registered Users Posts: 484 ✭✭Eldarion


    Deleted User wrote: »
    Why is it meant to be difficult?

    There is this weird attitude (this thread reeks of it) that a house is some sort of reward for years of self-sacrifice, a sort of prize for the 'deserving' few who never go out for a drink in their 20s.

    I'd like to live in a country that prioritises affordable property and doesn't put young people into this grinder. I suppose that's too much to ask.

    Well we live in a capitalist society. Those who are willing and have the ability to pay more should get more. I don't agree young couples in their early twenties should be able to buy 5 bed detached houses in SCD because you consider it socially unfair if they can't.

    The market will dictate the price, and this whole proposal will see that the market will reflect a more true value. You'll have less young people leveraging themselves beyond their means, bidding up property prices with money they don't have.


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    #843
    [Deleted User]
    Posts: 0 ✭ [Deleted User]


    Eldarion wrote: »
    The market will dictate the price, and this whole proposal will see that the market will reflect a more true value. You'll have less young people leveraging themselves beyond their means, bidding up property prices with money they don't have.

    LOL. You do realise the contradiction in what you just said? This specific measure is nothing to do with 'the market' or getting property to reflect a 'true value'. In fact it is the government interfering with freely entered into contracts in order to distort a market.

    Not that I am against the measure. But I also want to see other interventions that would skew the housing market in favour of potential first time buyers and owner occupiers. And I find the 'it's a good thing it is hard to buy a house' mentality mystifying.


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    #844
    El_Dangeroso
    Users Awaiting Email Confirmation Posts: 5,620 ✭✭✭El_Dangeroso


    gaius c wrote: »
    Golden trophy for this man.
    The notion that all discretionary spending should stop in order to save for a house deposit and then continue it in order to be able to pay the mortgage shows just how insane our priorities are.

    Worse than that is people seem think it's better to be crippled with a huge repayment for 35 years than just to sacrifice and save for 5!!


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    #845
    trobbin
    Registered Users Posts: 181 ✭✭trobbin


    Eldarion wrote: »
    Well we live in a capitalist society. Those who are willing and have the ability to pay more should get more. I don't agree young couples in their early twenties should be able to buy 5 bed detached houses in SCD because you consider it socially unfair if they can't.

    The market will dictate the price, and this whole proposal will see that the market will reflect a more true value. You'll have less young people leveraging themselves beyond their means, bidding up property prices with money they don't have.

    I totally agree with everything you said. And young people leveraging themselves at ridiculous lengths must surely be tackled.

    And I of course agree about everybody not being able to have the most sought after homes. However, the biggest problem is, every family should have their own home. I really believe that. But there're many families that work very hard and can't afford homes in Dublin, yet they're Dublin people, and that isn't right.

    Property is a necessity to families, and there should always be affordable homes. If you take Ireland's average disposable incomes and compare them to property prices and other living charges, well the answer is already there. Property is already to high. With more austerity ahead and interest rate certain to rise, I believe they will fall.


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    #846
    Glenbhoy
    Registered Users Posts: 1,853 ✭✭✭Glenbhoy


    Deleted User wrote: »
    LOL. You do realise the contradiction in what you just said? This specific measure is nothing to do with 'the market' or getting property to reflect a 'true value'. In fact it is the government interfering with freely entered into contracts in order to distort a market.

    Not that I am against the measure. But I also want to see other interventions that would skew the housing market in favour of potential first time buyers and owner occupiers. And I find the 'it's a good thing it is hard to buy a house' mentality mystifying.

    We could always just remove all planning restrictions, we can't have a properly functioning and efficient free market whilst they're still in place:)


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    #847
    Mongfinder General
    Registered Users Posts: 1,992 ✭✭✭Mongfinder General


    trobbin wrote: »
    I totally agree with everything you said. And young people leveraging themselves at ridiculous lengths must surely be tackled.

    And I of course agree about everybody not being able to have the most sought after homes. However, the biggest problem is, every family should have their own home. I really believe that. But there're many families that work very hard and can't afford homes in Dublin, yet they're Dublin people, and that isn't right.

    Property is a necessity to families, and there should always be affordable homes. If you take Ireland's average disposable incomes and compare them to property prices and other living charges, well the answer is already there. Property is already to high. With more austerity ahead and interest rate certain to rise, I believe they will fall.

    Interest Rates certain to rise? They still have a long way to fall. Most variables are still at 4%. Japan style deflation is gripping Central Europe so the ECB rate won't change for some time. Banks continue to cut the rate of interest they pay on deposits. I'm sure savers are only too happy to pay for cheaper interest rates for mortgage holders. As for austerity, the government can't afford it. They'll need voted in 12 months time.


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    #848
    handlemaster
    Registered Users Posts: 6,003 ✭✭✭handlemaster


    http://www.irishtimes.com/news/social-affairs/honohan-hints-20-mortgage-deposit-rule-may-be-eased-1.1993861

    Honohan rows back ... looking like insurance scheme will make a entry


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    #849
    [Deleted User]
    Posts: 0 ✭ [Deleted User]


    handlemaster wrote: »
    http://www.irishtimes.com/news/social-affairs/honohan-hints-20-mortgage-deposit-rule-may-be-eased-1.1993861

    Honohan rows back ... looking like insurance scheme will make a entry

    I'm not sure he has rowed back. The headline isn't supported by the quotes in the article. If anything, it sounds like he's dubious of certain forms of mortgage insurance (as outlined in the consultation paper).


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    #850
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,285 Mod ✭✭✭✭The_Conductor


    I was scratching my head while reading the Irish Times- and the later Indo piece- a headline about a U Turn (as per the Indo) is not justified by the comments attributed to the Central Bank at all........ Wishful thinking it would seem......... I wish journalists would quit trying to sensationalise news stories into something they patently are not..........


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    #851
    Mongfinder General
    Registered Users Posts: 1,992 ✭✭✭Mongfinder General


    The_Conductor wrote: »
    I was scratching my head while reading the Irish Times- and the later Indo piece- a headline about a U Turn (as per the Indo) is not justified by the comments attributed to the Central Bank at all........ Wishful thinking it would seem......... I wish journalists would quit trying to sensationalise news stories into something they patently are not..........

    It doesn't take much for a rumour to become expectation. When that expectation is not met then people get angry. Our national media obviously have an interest in promoting and flogging property - they make money from it. Rules and Regulations get in the way of that despite the very obvious need for them. So when a person in a position of power talks about the issue, any tenuous link to the direction in which the media wants policy pushed is seized upon.


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    #852
    El_Dangeroso
    Users Awaiting Email Confirmation Posts: 5,620 ✭✭✭El_Dangeroso


    It's really weird, RTE are saying the same thing, they have a preamble to the video that is in no way stated by Mr Honahan in the subsequent video.


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    #853
    NZ_2014
    Registered Users Posts: 306 ✭✭NZ_2014


    El_Dangeroso wrote: »
    It's really weird, RTE are saying the same thing, they have a preamble to the video that is in no way stated by Mr Honahan in the subsequent video.

    Cowboys, the lot of them.

    Seriously though very strange indeed.


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    #854
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,285 Mod ✭✭✭✭The_Conductor


    What he actually said- and I'm paraphrasing- is if first time buyers were willing to purchase insurance against a mortgage default- he didn't see any reason why the full 20% deposit need necessary apply....... Aka- ontop of life assurance and other costs- morgators would also be expected to pay insurance against a default separately (which presumably would have to be assessed by an underwriter).


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    #855
    MouseTail
    Registered Users Posts: 1,663 ✭✭✭MouseTail


    I don't think this is radical, I remember paying this for my first house here, mid 90s. I think it was 1%, a premium against default or negative equity. afaik it was compulsory for FTBers.

    I'm not sure when it was done away with, presumingly with deregulation.


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    #856
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,285 Mod ✭✭✭✭The_Conductor


    Its not radical at all- its enumerating the risk of any particular mortgage applicant defaulting on their mortgage, attaching a cost associated with this default- and using financial tables to work out an annual cost, on a reduction basis, of mitigating against the risk. In an era of low interest rates/low inflation- this cost may be a lot higher than you might imagine- the low inflation part of the equation would bump it up considerably (akin to debts- an era of higher inflation would eat away at the risk- and lower the cost of insuring against it)......

    There is nothing radical there whatsoever.......

    There is a risk when lenders lend, that borrowers may default on their debts.

    One manner of dealing with it- is to insist on much higher deposits- so borrowers have far more to loose, and are incentivised to not default, as they would loose their nest egg (the 20% deposit).

    The other manner- is to enumerate the risk and sell it- to an underwriter- who the borrower would in turn have to pay to cover the risk..........

    Its quite simple- and really nothing out of the ordinary- its simply an observation that a borrower could move the element of risk associated with their failing to pay their mortgage (for whatever reason) onto a third party. The fun and games would presumably start when underwriters try to enumerate how much it would cost to insure against these risks- and indeed the faith they may have in the information supplied to them by borrowers (and lending institutions)............

    It really is yet another- nothing to see here folks, keep moving..........


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    #857
    P. Breathnach
    Registered Users Posts: 12,089 ✭✭✭✭P. Breathnach


    The_Conductor wrote: »
    ...
    It really is yet another- nothing to see here folks, keep moving..........
    Let's imagine a lender who creates packaged products for those who want a higher-than-normal LTV, and want to borrow more than the higher-than-normal multiple of income(s). While we are at it factor in some concerns about future income stream. The package price covers SVR mortgage plus a premium to cover the added risk to the lender.

    The outcome is that those least able to afford housing end up paying more.

    The sub-prime mortgage has been re-invented.


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    #858
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,285 Mod ✭✭✭✭The_Conductor


    P. Breathnach wrote: »
    Let's imagine a lender who creates packaged products for those who want a higher-than-normal LTV, and want to borrow more than the higher-than-normal multiple of income(s). While we are at it factor in some concerns about future income stream. The package price covers SVR mortgage plus a premium to cover the added risk to the lender.

    The outcome is that those least able to afford housing end up paying more.

    The sub-prime mortgage has been re-invented.

    Yes- it is a re-invention of the subprime end of the market- however, I'd argue that if sufficient due dilligence is done on the part of underwriters for these less than 20% deposit products- the price of the insurance would be such to discourage all but those who can truly afford the mortgage from taking it out.

    We're not talking about a 30-40 Euro a month premium as insurance on a mortgage- we could be talking about a couple of hundred- perhaps some people can pay it- and if they can- perhaps they should try a different route than buying this insurance policy in the first instance........

    The other thing- the 80% mortgage is not across the board- the proposal was that lending institutions would have discretion to go over this limit in 20% of cases. If there is a strong candidate for a loan- why not try to be part of the 20% of exceptions? Pay a higher interest rate if need be- personally I'd be trying to steer clear of the insurance model- it introduces yet another variable into the equation- I like to try and keep financial transactions as clean as possible.........


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    #859
    Cuddlesworth
    Registered Users Posts: 13,995 ✭✭✭✭Cuddlesworth


    In terms of mortgages, I would guess that in a country with the highest default rate in the world, combined with the lowest recourse rate in the world, moving back into one of the highest house price inflation rates in the world, the terms of any current mortgage default insurance would be of astronomical cost.


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    #860
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,285 Mod ✭✭✭✭The_Conductor


    Cuddlesworth wrote: »
    In terms of mortgages, I would guess that in a country with the highest default rate in the world, combined with the lowest recourse rate in the world, moving back into one of the highest house price inflation rates in the world, the terms of any current mortgage default insurance would be of astronomical cost.

    I would echo this assumption.
    Presumably- anyone who can afford the mortgage insurance- would probably have a damn good case for being in the category of the 20% of applicants, who do not need a 20% deposit at the outset.
    This was the point I was trying to make (above).


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    #861
    Mongfinder General
    Registered Users Posts: 1,992 ✭✭✭Mongfinder General


    Cuddlesworth wrote: »
    In terms of mortgages, I would guess that in a country with the highest default rate in the world, combined with the lowest recourse rate in the world, moving back into one of the highest house price inflation rates in the world, the terms of any current mortgage default insurance would be of astronomical cost.

    The insurance premiums will be modest. They are just a palliative. Our policy makers are gambling on the insurance not being needed.

    Make no mistake about what is going to happen in this country. Full steam ahead, issue as many home loans as possible, and hope that the macro environment ferments economic and wage growth in order to support repayments.

    If this goes awry then we know what to expect.


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    #862
    Cuddlesworth
    Registered Users Posts: 13,995 ✭✭✭✭Cuddlesworth


    Mongfinder General wrote: »
    The insurance premiums will be modest. They are just a palliative. Our policy makers are gambling on the insurance not being needed.

    Make no mistake about what is going to happen in this country. Full steam ahead, issue as many home loans as possible, and hope that the macro environment ferments economic and wage growth in order to support repayments.

    If this goes awry then we know what to expect.

    The insurance rate will be assessed by qualified underwriters. They will not be influenced by our Policy makers outside of taking their horrendous decisions into account.


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    #863
    P. Breathnach
    Registered Users Posts: 12,089 ✭✭✭✭P. Breathnach


    Mongfinder General wrote: »
    The insurance premiums will be modest. They are just a palliative. Our policy makers are gambling on the insurance not being needed....
    Honohan is wise to the ways of politicians. What the Irish Times writes of as a possible easing of the rules includes the following from Honohan: “Of course, mortgage insurance would achieve relatively little if it merely shuffled systemic risk around within the domestic economy: external insurance from solid insurers would be needed”.

    External insurance would be based on a proper and cautious assessment of risk, not a wish to win elections.


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    #864
    Mongfinder General
    Registered Users Posts: 1,992 ✭✭✭Mongfinder General


    Cuddlesworth wrote: »
    The insurance rate will be assessed by qualified underwriters. They will not be influenced by our Policy makers outside of taking their horrendous decisions into account.

    Oh, I see. Do you mean the same way the Central Bank's stance on a 20% deposit has not been influenced in recent weeks?


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    #865
    Mongfinder General
    Registered Users Posts: 1,992 ✭✭✭Mongfinder General


    P. Breathnach wrote: »
    Honohan is wise to the ways of politicians. What the Irish Times writes of as a possible easing of the rules includes the following from Honohan: “Of course, mortgage insurance would achieve relatively little if it merely shuffled systemic risk around within the domestic economy: external insurance from solid insurers would be needed”.

    External insurance would be based on a proper and cautious assessment of risk, not a wish to win elections.

    I wish I had your confidence. Unfortunately the nature of the beast of the body politic in this country will find a way to circumvent that requirement. I suspect a State run insurance scheme is on the cards. External insurers would need to charge a serious wedge to make an insurance scheme feasible.


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    #866
    P. Breathnach
    Registered Users Posts: 12,089 ✭✭✭✭P. Breathnach


    Mongfinder General wrote: »
    I wish I had your confidence. Unfortunately the nature of the beast of the body politic in this country will find a way to circumvent that requirement. I suspect a State run insurance scheme is on the cards. External insurers would need to charge a serious wedge to make an insurance scheme feasible.
    Irish TDs, for the most part, have no political courage. They bend before the prevailing wind. Right now, they are pandering to the disappointed noises of some aspiring purchasers, I think Honohan's intervention was masterful: he is in effect telling them that if they want an insurance scheme, it must be a proper one, where the risk does not fall on the taxpayer. If the government now proposes a state insurance scheme the public debate will be coloured by Honohan's advice. What politician wants to face a charge of making the same kinds of mistake that the last government made?


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    #867
    Mongfinder General
    Registered Users Posts: 1,992 ✭✭✭Mongfinder General


    P. Breathnach wrote: »
    Irish TDs, for the most part, have no political courage. They bend before the prevailing wind. Right now, they are pandering to the disappointed noises of some aspiring purchasers, I think Honohan's intervention was masterful: he is in effect telling them that if they want an insurance scheme, it must be a proper one, where the risk does not fall on the taxpayer. If the government now proposes a state insurance scheme the public debate will be coloured by Honohan's advice. What politician wants to face a charge of making the same kinds of mistake that the last government made?

    They won't have to face the direct consequences. Most of our politicians are 50 plus, no mortgage worries, and pandering to populist opinion in order to get voted back in. Our entitlement culture makes our population feel that they have a right to a mortgage. Politicians know that this can be exploited. They couldn't care less, they will not be called to account. Worst case scenario, they get voted out.


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    #868
    El_Dangeroso
    Users Awaiting Email Confirmation Posts: 5,620 ✭✭✭El_Dangeroso


    Big splashy headline on the Sindo again today, jayz they're really trying to pile on the pressure aren't they?


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    #869
    Mongfinder General
    Registered Users Posts: 1,992 ✭✭✭Mongfinder General


    El_Dangeroso wrote: »
    Big splashy headline on the Sindo again today, jayz they're really trying to pile on the pressure aren't they?

    I saw that. I'd say most of them working in that office are up to their bollocks in negative equity. They'll do anything to get property prices up.


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    #870
    handlemaster
    Registered Users Posts: 6,003 ✭✭✭handlemaster


    If a large part of the FTB's that have been holding off for 6/7 years dont have 20% deposits on moderatly priced homes id be surprised.


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    #871
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,285 Mod ✭✭✭✭The_Conductor


    handlemaster wrote: »
    If a large part of the FTB's that have been holding off for 6/7 years dont have 20% deposits on moderatly priced homes id be surprised.

    To be 100% honest with you- anyone I know who was waiting- has emigrated. Few, if any, have any intention of coming back. I think the number of first time buyers out there- is a hell of a lot smaller than most commentators are alleging.


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