Central Bank to limit amount banks lend for home purchase

NZ_2014

The_Conductor wrote: »

People don't tend to do projects like this anymore- its not something people can afford. A proposal like this- would have alarm bells ringing in any credit assessment department- its so off-field........

And how the heck are they going to know, you just say its a bedroom or second sitting room and use it to do whatever you want :pac:. Although I suppose then the point that Victor makes is more relevant again.

ffactj

Please let there be no medelling with the property market.
Let it shake itself out and then find its own level and leave it alone.

Messing with the market over the years is what has caused all the issues in the first place.

Its like carrying a barrel half full of water and turning this direction and that. It sloshes all over the place until you lose control of it and it spills all over you. Leave it down by itself and it will level off and stay there.
Dont pick it up again.

Interference in the property market only leads to bad things down the line.

quadrifoglio verde

ffactj wrote: »

Please let there be no medelling with the property market.
Let it shake itself out and then find its own level and leave it alone.

Messing with the market over the years is what has caused all the issues in the first place.

Its like carrying a barrel half full of water and turning this direction and that. It sloshes all over the place until you lose control of it and it spills all over you. Leave it down by itself and it will level off and stay there.
Dont pick it up again.

Interference in the property market only leads to bad things down the line.

This isn't interference in the property market, this is protecting people from their own stupidity and their desire to keep up with the Jones's. Id like to live in a redbrick mansion in D4, but I know that even if a bank was willing to lend the money, it'd be foolish to do so. Some people however will think yay, i can live in a big house now and only realise afterwards that they can't afford it. They then go and blame the banks, instead of thinking ****e, its my fault. Harsh but true.

ffactj

quadrifoglio verde wrote: »

This isn't interference in the property market, this is protecting people from their own stupidity and their desire to keep up with the Jones's. Id like to live in a redbrick mansion in D4, but I know that even if a bank was willing to lend the money, it'd be foolish to do so. Some people however will think yay, i can live in a big house now and only realise afterwards that they can't afford it. They then go and blame the banks, instead of thinking ****e, its my fault. Harsh but true.

Maybe you should look up the definition of interference.
Leave well enough alone and it will shake itself out and stay shaken out.

Keep interfering and it will never find a level. It will keep swinging back and forth.

P. Breathnach

ffactj wrote: »

Please let there be no medelling with the property market.
...

No planning laws, no building regulations, no social provision for housing, no control on landlords' or tenants' obligations, no monetary or fiscal policy?

Yeah, right: sounds like a plan.

ffactj

P. Breathnach wrote: »

No planning laws, no building regulations, no social provision for housing, no control on landlords' or tenants' obligations, no monetary or fiscal policy?

Yeah, right: sounds like a plan.

You leave things the way they are right now.
Let it shake out and then things will find their level.
What is in place now is nearly played out. Introduce new change and we start again.

Hate to say this but - "Have we learned nothing"

P. Breathnach

ffactj wrote: »

You leave things the way they are right now...

The way things are right now is that we have a market that is not free. We have planning laws, building regulations, limited social provision for housing, some (I think insufficient) control on landlords' or tenants' obligations, an EU monetary policy, and a fiscal policy that is largely our own. And we have the recent introduction of property taxes, and we have the huge NAMA overhang.

ffactj

I'll leave to to it so.
Prepare for a boat rocking up and down like mad then.

jmayo

quadrifoglio verde wrote: »

This isn't interference in the property market, this is protecting people from their own stupidity and their desire to keep up with the Jones's. Id like to live in a redbrick mansion in D4, but I know that even if a bank was willing to lend the money, it'd be foolish to do so. Some people however will think yay, i can live in a big house now and only realise afterwards that they can't afford it. They then go and blame the banks, instead of thinking ****e, its my fault. Harsh but true.

Well I always use to think that way and still do for the most part.
But part of me can't help but think, what the hell, go for the biggest damm mortgage one can get and shure ignore them and fight them for years when you stop paying for it.
After all that is what has happened in thousands of instances up and down the country.

What incentive is there for new mortgage borrowers to act prudently when they see and hear of thousands who haven't and yet they still reside in their properties.
Then they hear nationwide organisations, media pundits, politicians fight for the rights of these people to be left in "their homes".

If the government, the banks, the regulatory authorities were serious about getting people to act responsibly in the future, they would surely not allow those who haven't in the past basically a free pass.

johnp001

jmayo wrote: »

Well I always use to think that way and still do for the most part.
But part of me can't help but think, what the hell, go for the biggest damm mortgage one can get and shure ignore them and fight them for years when you stop paying for it.
After all that is what has happened in thousands of instances up and down the country.

What incentive is there for new mortgage borrowers to act prudently when they see and hear of thousands who haven't and yet they still reside in their properties.
Then they hear nationwide organisations, media pundits, politicians fight for the rights of these people to be left in "their homes".

If the government, the banks, the regulatory authorities were serious about getting people to act responsibly in the future, they would surely not allow those who haven't in the past basically a free pass.

David McWilliams predicted this morning that the free pass might be about to expire.
www. davidmcwilliams . ie/2014/10/06/screams-in-the-suburbs
Current intervention/interference might be seen as necessary expediency to allow banks to pass stress tests on basis that asset values that they have loaned money against are artificially high but as post above states some accountability needs to be brought to bear eventually.

hmmm

ffactj wrote: »

You leave things the way they are right now.
Let it shake out and then things will find their level.

Unfortunately, one of the major reasons for the bubble was new banks (foreign & Irish) entering the Irish marketplace and being "innovative" with their products - i.e. competing for new business with higher multiples of salary, lower deposit requirements and less due diligence. Until then the banks had been quite restrained when lending, but once one bank lowers standards it forces everyone to follow them or lose market share.

We've had a clear example as to why market based regulation failed and will fail again in the future. That's why the CB need to set minimum standards for the good of everyone.

Roger_007

I have not read all the posts on this thread, so forgive me if someone has already asked this question:
When exactly did we make the transition from:

"The banks are NOT lending"

To:

"The banks are lending too much"

Eldarion

Roger_007 wrote: »

I have not read all the posts on this thread, so forgive me if someone has already asked this question:
When exactly did we make the transition from:

"The banks are NOT lending"

To:

"The banks are lending too much"

Right around the time BOI offered to pay stamp duty for first time buyers I think.

Kinet1c

Some information here with exact criteria to be outlined tomorrow

The Central Bank will introduce measures to limit the amount that banks can lend to customers looking to buy a home, according to Governor Patrick Honohan.
Mr Honohan said details of the measures, which could cap the size of a loan based on the value of the property or the income of the borrowers, would be announced tomorrow.
Speaking at UCD’s Economics Society, he said given how badly banks had misjudged the riskiness of loans during the boom, it was “hard to deny” that a cap of some kind would stop a similar situation arising again.

In the past banks had followed rules on loan-to-value and loan-to-income ratios “which seemed to keep them out of trouble”, he said, and there would be a benefit to reintroducing them as property prices began to rise again.
“Even in the absence of a credit-driven bubble, there is much to be said for bringing back some rules of this type,” he said.
He said any such rules were not governed by European law and were at the discretion of national authorities.
Mr Honohan also supported a call by the Irish Fiscal Advisory Council for the Government to use any additional revenue to pay down the national debt.
He said doing so would help convince international investors markets that it was determined to meet fiscal goals set out by the EU.
He also noted rising interest rates amongst non-tracker mortgage holders, despite the European Central Bank rate being at a record low level.
However, he said he would not support the Central Bank being given powers to set a ceiling on such rates, as it could discourage a foreign company from entering the market to compete.
“If local banks are charging unnecessarily high interest rates, that will be an inducement for new entry into lending here,” he said.
“In contrast, aggressive official interest rate spread control would be the clearest warning signal to would-be entrants that they might not be permitted to earn sufficient profits to justify the costs of entering.”

Paddy1234

What effect do people think this will have on house prices? It will have to at least stabilise them. 25% a year is just bonkers in any normal functioning economy

Frank Lee Midere

ffactj wrote: »

You leave things the way they are right now.
Let it shake out and then things will find their level.
What is in place now is nearly played out. Introduce new change and we start again.

Hate to say this but - "Have we learned nothing"

Yeah we learned we shouldn't be giving people too much credit. You haven't learnt anything though.

Frank Lee Midere

Patrick Honohan is the first public servant in living memory who seems to believe that housing prices rises are not necessarily a good thing. He should probably have a word with NAMA.

who_ru

Frank Lee Midere wrote: »

Patrick Honohan is the first public servant in living memory who seems to believe that housing prices rises are not necessarily a good thing. He should probably have a word with NAMA.

i believe he's under instruction from the troika, to whom we still owe billions.

Frank Lee Midere

who_ru wrote: »

i believe he's under instruction from the troika, to whom we still owe billions.

Maybe. We should note that we have managed to increase house prices by 33% in Dublin since the troika left. We might want them back.

L1011

Roger_007 wrote: »

I have not read all the posts on this thread, so forgive me if someone has already asked this question:
When exactly did we make the transition from:

"The banks are NOT lending"

To:

"The banks are lending too much"

Late 2012 when the TRS driven jump in sales stated

Kaizersoze81

This is welcome news. Hopefully will have a stabilising affect on rising prices.

spockety

A worrying few hours ahead for people who have gone sale agreed and are just in the process of a sale without having yet drawn down a mortgage. If these proposals are enacted immediately there is inevitably going to be some short term heartache.

Frank Lee Midere

spockety wrote: »

A worrying few hours ahead for people who have gone sale agreed and are just in the process of a sale without having yet drawn down a mortgage. If these proposals are enacted immediately there is inevitably going to be some short term heartache.

By most accounts the banks are mostly adhering to these criteria. This is a pre-emotive strike by the CB.

spockety

If it's an 80% LTV limit, that's going to be a shocker for a lot of people.

on_my_oe

NZ applied a 20% LTV in October 2013, and it did temporarily slow down property increases, but within six months, prices were increasing again at a rapid rate. The actual effect was to shut out FTBs, as many had 10% deposits, and this flowed on to the rental market; those locked out of the buyers market are stuck renting, so lower income families can't get a rental property because private professional renters are more appealing.

Lower income families are living two to a property, with one family living in the house and one living in the garage or worse, in a tent in the backyard. If they're really unlucky, they're in a car.

I'd hope they follow the UK voluntary method of 4x income

Frank Lee Midere

on_my_oe wrote: »

NZ applied a 20% LTV in October 2013, and it did temporarily slow down property increases, but within six months, prices were increasing again at a rapid rate. The actual effect was to shut out FTBs, as many had 10% deposits, and this flowed on to the rental market; those locked out of the buyers market are stuck renting, so lower income families can't get a rental property because private professional renters are more appealing.

Lower income families are living two to a property, with one family living in the house and one living in the garage or worse, in a tent in the backyard. If they're really unlucky, they're in a car.

I'd hope they follow the UK voluntary method of 4x income

4x income isn't stopping 10x prices in London.

Zamboni

on_my_oe wrote: »

NZ applied a 20% LTV in October 2013, and it did temporarily slow down property increases, but within six months, prices were increasing again at a rapid rate. The actual effect was to shut out FTBs, as many had 10% deposits, and this flowed on to the rental market; those locked out of the buyers market are stuck renting, so lower income families can't get a rental property because private professional renters are more appealing.

This was the first thing that came to my mind.
I think this will simply push low and average earning FTBers out of the market and/or out of the capital.
The luxury of house ownership will revert to the professional classes.

Balmed Out

Zamboni wrote: »

This was the first thing that came to my mind.
I think this will simply push low and average earning FTBers out of the market and/or out of the capital.
The luxury of house ownership will revert to the professional classes.

Your only one thanks from 50 now....

One would imagine it wont have too big an affect on the lower end of the housing market but its going to make it a lot harder for people who want family homes.

I cant help but think it'll promote the return of the property ladder whereby in order to save the money necessary for buying a family home you need to either buy a smaller one first or live with Mum and Dad for an extended period.

hmmm

Zamboni wrote: »

This was the first thing that came to my mind.
I think this will simply push low and average earning FTBers out of the market and/or out of the capital.

Would we prefer to go back to 2006 and let low income FTBs get mortgages for 6 times their earnings? It's great that everyone feels it's their human right to own a house, but this Irish thing has nearly bankrupted the country once already.

Zamboni

hmmm wrote: »

Would we prefer to go back to 2006 and let low income FTBs get mortgages for 6 times their earnings? It's great that everyone feels it's their human right to own a house, but this Irish thing has nearly bankrupted the country once already.

It's not everybody's right to own a house but it would be nice if a working couple on combined average salary (70-80k) less childcare can (a) afford to save after paying rent in order to (b) purchase average accommodation*.

*average accommodation would simply mean better than that which non working people receive through benefits.

Government policy keeps blurring the lines between non working and average earning workers. That grey area is becoming wider and wider.

He who earns the most gets the most.
People who work should have better circumstances than those who don't.
Society should look after the genuine poor.