Central Bank to limit amount banks lend for home purchase

handlemaster

The_Conductor wrote: »

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.

FTB come along every year so maybe the first year or two have flewn the country but there would be lots after

This article in the times suggests there are lots of irish abroad looking to buy

http://www.irishtimes.com/life-and-style/mortgages-for-emigrants-buying-a-house-at-home-in-ireland-1.1991001?page=1

gaius c

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.

The moderately priced homes bit is key.
A 3 bed semi in an outer Dublin suburb for €250k is fairly manageable with both parties saving €50k between them and €200k in borrowings.
That means payments of a bit over a grand a month (assumed 25 years - might not be practical if they are older) and they have enough to cover other expenses.

When those same houses are in the €300k-€350k bracket, 90% mortgages will still allow you to buy them but a €1550 a month mortgage is punchy stuff. Too much stretch on average incomes in my opinion.

gaius c

handlemaster wrote: »

FTB come along every year so maybe the first year or two have flewn the country but there would be lots after

This article in the times suggests there are lots of irish abroad looking to buy

http://www.irishtimes.com/life-and-style/mortgages-for-emigrants-buying-a-house-at-home-in-ireland-1.1991001?page=1

RUN! DON'T WALK to your nearest bank before some "chicken runner" steals the home of your dreams from you.

Re the bit in bold, you are incorrect.
Our mini-baby boom of the 70's/80's drove much of the noughties growth (bubble or otherwise). Now they are up to their oxters in debt and the generation behind them is:
1. Smaller to begin with. Much smaller actually.
2. Faced with poor employment prospects and emigration.

HamsterFace

gaius c wrote: »

The moderately priced homes bit is key.
A 3 bed semi in an outer Dublin suburb for €250k is fairly manageable with both parties saving €50k between them and €200k in borrowings.
That means payments of a bit over a grand a month (assumed 25 years - might not be practical if they are older) and they have enough to cover other expenses.

When those same houses are in the €300k-€350k bracket, 90% mortgages will still allow you to buy them but a €1550 a month mortgage is punchy stuff. Too much stretch on average incomes in my opinion.

Where are these 250k homes? Seriously?

leinsterdude

HamsterFace wrote: »

Where are these 250k homes? Seriously?

Kildare

gaius c

HamsterFace wrote: »

Where are these 250k homes? Seriously?

That's pretty much my point. Right now, those homes are to be found in Finglas, Blanch, Longmile Road, Citywest, etc just to pick a few areas.
For now.

With the mattress money cash buyers draining from the market, the amount of finance FTB's can access will play a more important role in market pricing. That's why there is complete panic across all sections of the media and property VI's.

Michael D Not Higgins

HamsterFace wrote: »

Where are these 250k homes? Seriously?

He did say outer Dublin suburb

http://www.daft.ie/sales/16-newcourt-swords-dublin/1005483/ as an example. I did a search on daft.ie for North, West and South County Dublin for min 3 bed from 225k-275k and it has 206 results.

HamsterFace

Michael D Not Higgins wrote: »

He did say outer Dublin suburb

as an example. I did a search on daft.ie for North, West and South County Dublin for min 3 bed from 225k-275k and it has 206 results.

Look at the ber certs on those gafs! They would eat money. Much better Off paying 320 for a brand new house, will probably take a lifetime to make the money back in energy savings but it would be totally worth it in comfort.

Think people need to be conscious that these reasonable houses often need a lot of work. They're old.

Michael D Not Higgins

HamsterFace wrote: »

Look at the ber certs on those gafs! They would eat money. Much better Off paying 320 for a brand new house, will probably take a lifetime to make the money back in energy savings but it would be totally worth it in comfort.

Think people need to be conscious that these reasonable houses often need a lot of work. They're old.

In fairness from what I can tell of the BER from people's threads on boards is that it's all a bit qualitative. Some people go from a D to a C after spending 20k on insulation and upgrades.

GavMan

HamsterFace wrote: »

Look at the ber certs on those gafs! They would eat money. Much better Off paying 320 for a brand new house, will probably take a lifetime to make the money back in energy savings but it would be totally worth it in comfort.

Think people need to be conscious that these reasonable houses often need a lot of work. They're old.

BER, from what I can tell, is the biggest load of spoof going. For example, no one really has a bulls notion the condition of your cavity insulation, if you even have any. So most of them could be completely wide of the mark.

In any case, Even if you went all out upgrading the heating system, attic insulation, got the cavity filled or cladded the exterior of the house, You still wouldn't spending anything like 70k and the difference would probably be negligible.

IMO, BER should have relatively little bearing on choosing a property

HamsterFace

GavMan wrote: »

BER, from what I can tell, is the biggest load of spoof going. For example, no one really has a bulls notion the condition of your cavity insulation, if you even have any. So most of them could be completely wide of the mark.

In any case, Even if you went all out upgrading the heating system, attic insulation, got the cavity filled or cladded the exterior of the house, You still wouldn't spending anything like 70k and the difference would probably be negligible.

IMO, BER should have relatively little bearing on choosing a property

But it does have an impact on the price. The 250k house isn't really that price when you have to throw some more money into it.

There's also associated mortgage issues then when you can only borrow to the value of a house, pre improvements.

Just some reasons why these cheap houses are often unattractive to people

Michael D Not Higgins

HamsterFace wrote: »

But it does have an impact on the price. The 250k house isn't really that price when you have to throw some more money into it.

There's also associated mortgage issues then when you can only borrow to the value of a house, pre improvements.

Just some reasons why these cheap houses are often unattractive to people

But the BER could mean feck all to the running costs.

That's a new one I have to say. Cheap houses are unattractive because you can't borrow as much money.

The Spider

I think this will have interesting consequences, first off all property in Dublin will be unaffordable, people who can't achieve the asking will take their houses off the market, my own instinct is that the increase in houses for sale at the moment is on houses that are no longer in negative equity. People won't sell their houses and leave themselves with a debt and no asset, they'll stay put and continue to pay down the mortgage.

I can't see developers jumping into the Dublin market when the price they can achieve is going to be seriously curtailed, that means no new supply. Dwindling supply will leave the people who have access to cash whether it's from parents, savings or wise investments in a postion to buy what little supply there is.

Rents will rise substantially as there's a better return on rent than could be achieved selling,as people need to live somewhere, rising rents will erode peoples ability to save as the rent has to be paid.

Commuter counties could see a jump as people priced out of Dublin find that the 10% deposit they saved may no longer cover a house in Dublin but does allow them to buy a house in Meath, etc. If you've managed to save 10% of a 350'000 house in Dublin but now need 70'000 deposit, that 35'000 you've saved will allow you to buy any of these:

http://www.daft.ie/meath/houses-for-sale/?s%5Barea_type%5D=on&s%5Bmxp%5D=150000&s%5Bmnb%5D=3&s%5Badvanced%5D=1&s%5Bpt_id%5D%5B0%5D=1


Article below, comments are worth reading.

http://www.thejournal.ie/houses-for-sale-new-regulations-1710376-Oct2014/

So prices have been rising fast and are on an upward trajectory under current circumstances.

Unless the Central Bank intervenes with strict new lending rules...which will cause prices to rise fast and continue on an upward trajectory.

The only way is up. Baby.

Michael D Not Higgins

Can anyone confirm if the CB limits on LTI are only on the main income? I've seen a daft.ie report talking about the 50k average household income and basing some analysis on that, while others only talking of multiples of one income.

The_Conductor

From anecdotal evidence- a lot of the current crop of houses for sale, are executor sales that got pulled earlier in the year (thats from talking to a few different estate agents). Receiver sales are also sharply up........

The Spider

Deleted User wrote: »

So prices have been rising fast and are on an upward trajectory under current circumstances.

Unless the Central Bank intervenes with strict new lending rules...which will cause prices to rise fast and continue on an upward trajectory.

The only way is up. Baby.

Didn't say that, what I said was the new rules, will restrict the amount of properties for sale in Dublin if prices can't be achieved, but will push people who want to buy to look outside Dublin. Any effect this will have in terms of prices dropping will take 5-10 years to achieve, if it happens at all you could find a situation that only the wealthy can afford to buy anywhere in Dublin, due to a continued lack of supply.

The supply/seller psychology argument in an interesting one. In the summer, people who predicted rising prices were saying that supply was tight because would-be sellers were holding off until next year when they expected to get more money for their house.

Now we hear that people won't sell if they think there will be fewer buyers.

People (on both sides of the 'argument') will always find a way to fit the facts into their belief.

My expectation (read: hope) is that price rises ease off in the coming months - maybe even with some price drops. If there is ever to be a mortgage insurance scheme it will be private, expensive and will take several months before it's launched.

The Spider

Deleted User wrote: »

The supply/seller psychology argument in an interesting one. In the summer, people who predicted rising prices were saying that supply was tight because would-be sellers were holding off until next year when they expected to get more money for their house.

Now we hear that people won't sell if they think there will be fewer buyers.

People (on both sides of the 'argument') will always find a way to fit the facts into their belief.

My expectation (read: hope) is that price rises ease off in the coming months - maybe even with some price drops. If there is ever to be a mortgage insurance scheme it will be private, expensive and will take several months before it's launched.

Well there's a bit from Column A and a bit from Column B argument in it, I reckon, Sellers will always want the maximum they can get, and buyers will want to pay as little as possible, that's capitalism.

Apart from that, people definitely won't sell if it leaves them in debt, if they don't have to.

When people see prices rising they try to hang on and maximise profits, if you see gains on similar houses in the thousands every month, it's a big temptation to hang in there. But we all know what happened in 2007...

Different situation this time around though, lack of supply is the driver of prices, the 20% deposit will in my opinion constrict supply even more. Will take a few years to know if it's the correct strategy or not, my instinct tells me Dublin prices will be out of reach, and more people will have to get used to renting.

The Spider

The Spider wrote: »

Didn't say that, what I said was the new rules, will restrict the amount of properties for sale in Dublin if prices can't be achieved, but will push people who want to buy to look outside Dublin. Any effect this will have in terms of prices dropping will take 5-10 years to achieve, if it happens at all you could find a situation that only the wealthy can afford to buy anywhere in Dublin, due to a continued lack of supply.

Yes, to be fair, you didn't really say prices would rise. Sorry about that. It's an argument I've heard elsewhere.

Genuine question: why do you say that any price drops would take 5-10 years?

Just a general point, the CB paper says half of all mortgages last year were in the 80%+ bracket. And, depending on who you listen to, around half of all purchases were made with mortgages. So that means 1/4 of would-be purchasers are affected. But there is wriggle room in the new rules where the banks can make exceptions for (I think) 15% of new mortgages. This means there will still be buyers out there, just not quite as many. I don't expect a crash, just a calming effect. (Jesus, did I just call a 'soft landing'?!)

---
In terms of second-hand houses, a lot of what comes up in Dublin is from executor sales and, to a lesser extent, divorce/separation. That won't change much. If anything, a family inheriting a house would be as well to sell pronto if there are falling numbers of buyers. Whereas (with perfect hindsight) if you inherited something in 2013 the thing to do would have been rent it for a year and offload it in the summer of 2014.

For trader-uppers, lower prices in Dublin would make it a good time to move (if it closes the gap between the price they get for their current house and the price they pay for their new, bigger one).

P. Breathnach

The Spider wrote: »

... Different situation this time around though, lack of supply is the driver of prices, the 20% deposit will in my opinion constrict supply even more....

In areas like Dublin 6, the 20% deposit will impact more directly on demand: some potential purchasers will be driven out of the market.

I am looking here at housing comprising a number of markets, and some of the Dublin 6 demand might be shifted to places like Dublin 8 or Dublin 14, where prices tend to be a bit lower. Those currently trying to purchase in Dublin 8 or Dublin 14 might be driven to look elsewhere, and so on.

The Spider

Deleted User wrote: »

Yes, to be fair, you didn't really say prices would rise. Sorry about that. It's an argument I've heard elsewhere.

Genuine question: why do you say that any price drops would take 5-10 years?

Just a general point, the CB paper says half of all mortgages last year were in the 80%+ bracket. And, depending on who you listen to, around half of all purchases were made with mortgages. So that means 1/4 of would-be purchasers are affected. But there is wriggle room in the new rules where the banks can make exceptions for (I think) 15% of new mortgages. This means there will still be buyers out there, just not quite as many. I don't expect a crash, just a calming effect. (Jesus, did I just call a 'soft landing'?!)

---
In terms of second-hand houses, a lot of what comes up in Dublin is from executor sales and, to a lesser extent, divorce/separation. That won't change much. If anything, a family inheriting a house would be as well to sell pronto if there are falling numbers of buyers. Whereas (with perfect hindsight) if you inherited something in 2013 the thing to do would have been rent it for a year and offload it in the summer of 2014.

For trader-uppers, lower prices in Dublin would make it a good time to move (if it closes the gap between the price they get for their current house and the price they pay for their new, bigger one).

Maybe 10 years is pushing it the reason for say 5 years anyway is that I think, (bearing in mind it's my opinion and I've been known to be wrong) is that sellers won't sell if what they see as a figure in their own heads can be achieved. Sellers that find they can now only achieve a figure that still leaves them in negative equity will take the house off the market and continue to pay down the debt, 5 years could make a decent dent in that.

All comes down to whats owed on the houses for sale, houses owned outright can probably absorb any drops.

jay0109

P. Breathnach wrote: »

In areas like Dublin 6, the 20% deposit will impact more directly on demand: some potential purchasers will be driven out of the market.

I am looking here at housing comprising a number of markets, and some of the Dublin 6 demand might be shifted to places like Dublin 8 or Dublin 14, where prices tend to be a bit lower. Those currently trying to purchase in Dublin 8 or Dublin 14 might be driven to look elsewhere, and so on.

I'd suspect that most of those buying the red bricks in D6 won't be too worried/put out by CB limits on mortgages

tigershould

I spoke to the bank today and they told me there's a massive rush of buyers getting their approval in principle this December so that they can stick to the existing rules before the new CB guidelines are introduced in the new year.

This means that for the first 6 months next year there will be a flurry of buyers trying to get their new home before they have to stump up 20%.

So in reality (imo) if we are to see any drops they definately won't happen in the first half of next year and if anything we will probably see a continuation of rises.

If I was being cynical I would say this has been the ploy all along. To make the buyers dispose their hard saved cash by threatening to increase deposit rates.

*removes tin foil hat*

Mongfinder General

gaius c wrote: »

That's pretty much my point. Right now, those homes are to be found in Finglas, Blanch, Longmile Road, Citywest, etc just to pick a few areas.
For now.

With the mattress money cash buyers draining from the market, the amount of finance FTB's can access will play a more important role in market pricing. That's why there is complete panic across all sections of the media and property VI's.

I wouldn't put an animal in Citywest.

Glenbhoy

Michael D Not Higgins wrote: »

Can anyone confirm if the CB limits on LTI are only on the main income? I've seen a daft.ie report talking about the 50k average household income and basing some analysis on that, while others only talking of multiples of one income.

The document doesn't say main income and I think that concept seems to have drifted away many years ago in any case. Given the reaction to the 20% deposit, there would be outright revolution (led by Inda) if the CBI were to propose that the income in question was actually 'main income' only.

Larry Wildman

What do you mean by "main income"?

Glenbhoy

tigershould wrote: »

I spoke to the bank today and they told me there's a massive rush of buyers getting their approval in principle this December so that they can stick to the existing rules before the new CB guidelines are introduced in the new year.

This means that for the first 6 months next year there will be a flurry of buyers trying to get their new home before they have to stump up 20%.

So in reality (imo) if we are to see any drops they definately won't happen in the first half of next year and if anything we will probably see a continuation of rises.

If I was being cynical I would say this has been the ploy all along. To make the buyers dispose their hard saved cash by threatening to increase deposit rates.

*removes tin foil hat*

I said it before on here, the document itself says it expects banks to take note of the proposals from the day they were issued and they won't put up with this rush to approve prior to the deadline. Anyone getting a sanction in principal on the old rules prior to Jan should remember that the bank will not be under any obligation to make them an offer when they find the property they want. Banks are allowed to deviate from the proposals in some circumstances and they will take the pick of the approvals before Jan, but I suspect that most people will be disappointed when it comes to drawdown.

I'd expect quite a few sale agreeds to fall through in the first quarter.

Glenbhoy

Larry Wildman wrote: »

What do you mean by "main income"?

In the olden days it would have been the higher income, if two or more parties to a mortgage were earning.

Larry Wildman

Glenbhoy wrote: »

In the olden days it would have been the higher income, if two or more parties to a mortgage were earning.

Which is a joke really.

If you've two incomes, one is no less valuable than the other in terms of multiples etc.