Central Bank to limit amount banks lend for home purchase

Balmed Out

Greyian wrote: »

This all ignores the simple fact of the matter that a couple on €x per year with no children will always be in a better position than a couple of €x per year with 2 children, all others things being equal.

I agree with your post but never understand the logic behind this point.

Presuming the couple are hetrosexual and young enough to have kids then the overwhelming majority will. Most of the others will at least try and spend quite a lot doing that. I dont think theres a massive amount of couples who never intend on having kids.

As a mortgage is a long term commitment then most will have to finance it and the kids at some point. Those that have kids before buying a house will have incurred expenses the other couple havent yet and will have shown an ability to save while paying for kids too.

Greyian

Balmed Out wrote: »

I agree with your post but never understand the logic behind this point.

Presuming the couple are hetrosexual and young enough to have kids then the overwhelming majority will. Most of the others will at least try and spend quite a lot doing that. I dont think theres a massive amount of couples who never intend on having kids.

As a mortgage is a long term commitment then most will have to finance it and the kids at some point. Those that have kids before buying a house will have incurred expenses the other couple havent yet and will have shown an ability to save while paying for kids too.

I was addressing his point about the deposit requirement being too high. In the case of a couple with no kids, that doesn't really matter in the future. If they have kids after they've bought the house, that wouldn't have any effect on their ability to save for the deposit, which is what most people seem to regard as the most difficult part of a mortgage (qualifying for it).

Balmed Out

Greyian wrote: »

I was addressing his point about the deposit requirement being too high. In the case of a couple with no kids, that doesn't really matter in the future. If they have kids after they've bought the house, that wouldn't have any effect on their ability to save for the deposit, which is what most people seem to regard as the most difficult part of a mortgage (qualifying for it).

I completely agree with you. Banks do however give more to childless couples regardless of the intentions to have kids. I always wonder why, for me a couple who have their kids and have shown the financial where with all to pay those extra costs and rent and save for a deposit would surely be a better bet.

makeorbrake

Greyian wrote: »

which is what most people seem to regard as the most difficult part of a mortgage (qualifying for it).

And a lot of people are missing the point. The hardest part of a mortgage is ensuring that the means are always there to pay it back consistently - from day1 to final payment...regardless of environmental and personal circumstances changing...eg. interest rate hike (inevitable eventually), substantially reduced disposable income (be that due to childcare costs or whatever else), etc.

on that basis, it's wise to implement a measure that insists on 20% deposit. Not only will that help to ground prices over the long term but it means its so much less likely that those who shouldn't be taking out a mortgage end up doing so...or....that people over stretch themselves.

gaius c

Larry Wildman wrote: »

So someone who had managed to haul themselves out of negative equity, get their apartment to parity, save 10%, pay tax on the rental income, pay exhorbitant childcare costs and hold down a job suddenly cannot buy a house?

The State seems determined to ruin the lives of ordinary people. The sooner that Lucinda Creighton's new party gets going, the better.

Aye. Much better to give them bigger debt because nobody in the history of mankind has ever run into trouble for loading up on debt.

The_Conductor

I keep shaking my head reading this thread.........
People really don't seem to have learnt anything from the boom and bust.
Its not normal for everyone to own property- in most societies a significant portion of the population rent- for life- and this is viewed as normal.
As they move into different life stages- they move into property more appropriate to their then needs.

Roll on 20% deposits- but alongside it- revisit the rights and obligations of both landlords and tenants, allow the letting of unfurnished property, increase deposits to a reasonable level, secure tenancies for tenants properly, where tenants are in breach of their obligations- allow a landlord evict them in an expedient manner (aka where they aren't paying their rent), etc etc etc

At the moment- everyone seems to view renting as a short term solution on their road to owning property- when in most countries- its far from the case.

Alongside all of this- reform the tax regime for landlords- there is no incentive to landlords repaying their debts at the moment- why would they when 75% of the interest accruing on the debt is allowable as a tax deductible expense? If a landlord is prudent- and does pay down their debts- then its a 57-58% tax rate, as they also have to pay PRSI on rental income.........

The whole sector is tied up in knots- there is a lack of joined up thinking- alongside wholly unreasonable and unrealistic expectations that are fanned by the populist statements of politicians- who don't seem to know their arses from their elbows.......

Barely Hedged

The_Conductor wrote: »

I keep shaking my head reading this thread.........
People really don't seem to have learnt anything from the boom and bust.
Its not normal for everyone to own property- in most societies a significant portion of the population rent- for life- and this is viewed as normal.
As they move into difyferent life stages- they move into property more appropriate to their then needs.

Roll on 20% deposits- but alongside it- revisit the rights and obligations of both landlords and tenants, allow the letting of unfurnished property, increase deposits to a reasonable level, secure tenancies for tenants properly, where tenants are in breach of their obligations- allow a landlord evict them in an expedient manner (aka where they aren't paying their rent), etc etc etc

At the moment- everyone seems to view renting as a short term solution on their road to owning property- when in most countries- its far from the case.

Alongside all of this- reform the tax regime for landlords- there is no incentive to landlords repaying their debts at the moment- why would they when 75% of the interest accruing on the debt is allowable as a tax deductible expense? If a landlord is prudent- and does pay down their debts- then its a 57-58% tax rate, as they also have to pay PRSI on rental income.........

The whole sector is tied up in knots- there is a lack of joined up thinking- alongside wholly unreasonable and unrealistic expectations that are fanned by the populist statements of politicians- who don't seem to know their arses from their elbows.......

That is the problem and the solution tied up in one, nice neat post.

Larry Wildman

A 90% requirement is fine.

Aspiring to get to 80% is fine but it should be phased in over time rather than via a "big bang".

I know people who are distraught about this measure. They get sweet FA in the form of support and pay for everything.

Home ownership is a fundamental foundation of Irish life and should be.

Way to much pious and smug stuff in this thread...a "let them eat cake" philosophy.

Greyian

Larry Wildman wrote: »

A 90% requirement is fine.

Aspiring to get to 80% is fine but it should be phased in over time rather than via a "big bang".

I know people who are distraught about this measure. They get sweet FA in the form of support and pay for everything.

Home ownership is a fundamental foundation of Irish life and should be.

Way to much pious and smug stuff in this thread...a "let them eat cake" philosophy.

Underlined 1
So again, give people loads of money now, so they can have their dream home, and let future generations suffer? Seems fair.

Underlined 2
Firstly, it would be your opinion that it should be a fundamental foundation of Irish life, if you're going to state it as fact, you should really provide some empirical evidence supporting it.
More importantly, the average person/family can still afford a home in Ireland, with the 20% deposit rule. Lower/middle income families/individuals just can't afford to buy properties in the higher-end areas of the market (Malahide, Howth, large chunks of South Dublin etc).

makeorbrake

Larry Wildman wrote: »

A 90% requirement is fine.

Aspiring to get to 80% is fine but it should be phased in over time rather than via a "big bang".

I know people who are distraught about this measure. They get sweet FA in the form of support and pay for everything.

Home ownership is a fundamental foundation of Irish life and should be.

Way to much pious and smug stuff in this thread...a "let them eat cake" philosophy.

I don't agree it should be phased in. Letting it be 'phased in' is an irish way of making it so that ultimately it simply doesn't get implemented! otherwise, why should it be phased in? There is already going to be delayed effect with this measure as it stands.


It seems that some people are distraught re. this measure - but its absolutely crazy of them to be 'distraught'!

This measure protects those very same people. As regards home ownership being a 'fundamental right', that's absolute nonsense. Having a roof over your head is the fundamental right - homeownership isnt.

Even if people feel that it's 'fundamental', they can still pursue that goal. It just means that they have to plan that buying decision - as a purchase of that magnitude deserves. You can't have people making fickle short term decisions in this regard. Lets face it - the irish are not predisposed to long term planning as a people. With regard to home purchasing, this has to change.

Larry Wildman

I have a friend whose circumstances are as follows:

She and her husband bought an apartment before they were married. They lived in it until they had two kids. By that time, the economic crisis meant that their apartment was in negative equity so they were stuck with it but it was totally unsuitable for their needs. So they rented a house. They are now paying pretty sizeable rent, paying a hefty amount of tax on their rental income, paying high childcare costs and still managing to save a deposit for a house. Renting long term doesn't suit them because of the uncertainty around being turfed out year on year. Rents are also going through the roof and will go higher because of these measures. This impacts on their ability to save - A vicious circle so to speak.

They almost have 10% of the purchase price for a home in the area where their children are in school. For them, this measure is devastating - They are being forced to rent when they don't want to. They are accidental tenants and accidental landlords. Prices won't fall (they didn't fall in New Zealand when this was brought in). Why should my friends be prevented from buying a house? They have never been out of work, despite the recession. They earn good money. A subsequent fall in the value of their house won't really bother them because it's a home for life.

What I see in the country is an infrastructure that seems designed to support wasters and scroungers and to frustrate and make life difficult for people who just try to do their best.

accensi0n

Larry Wildman wrote: »

I have a friend whose circumstances are as follows:

She and her husband bought an apartment before they were married. They lived in it until they had two kids. By that time, the economic crisis meant that their apartment was in negative equity so they were stuck with it but it was totally unsuitable for their needs.

Were the kids planned? Buying an over priced apartment and then having kids probably wasn't the best decision. Would they have been better renting initially and then saving up for the house? Did they gamble with the apartment purchase in the hope of flipping it?

matt-dublin

accensi0n wrote: »

Were the kids planned? Buying an over priced apartment and then having kids probably wasn't the best decision. Would they have been better renting initially and then saving up for the house? Did they gamble with the apartment purchase in the hope of flipping it?

I'm sorry but your post has infuriated me. That is the most ridiculous post I've seen here.

We're their kids planned, what sort of bloody person are you???

MouseTail

The_Conductor wrote: »

I keep shaking my head reading this thread.........
People really don't seem to have learnt anything from the boom and bust.
Its not normal for everyone to own property- in most societies a significant portion of the population rent- for life- and this is viewed as normal.

..

Your post ignores the impending demographic crisis and the pension savings gap, not just here, but across Europe. There are clear economic reasons for encouraging home ownership, so the State does not have to meet the housing needs of older people in the future, or indeed nursing home care.
Encouraging long term renting, whilst not addressing the pension gap is storing up big trouble for the future.

makeorbrake

matt-dublin wrote: »

I'm sorry but your post has infuriated me. That is the most ridiculous post I've seen here.

We're their kids planned, what sort of bloody person are you???

It's NoT the most ridiculous post - it's a very relevant point.

Larry Wildman wrote:

I have a friend whose circumstances are as follows:

She and her husband bought an apartment before they were married. They lived in it until they had two kids. By that time, the economic crisis meant that their apartment was in negative equity so they were stuck with it but it was totally unsuitable for their needs. So they rented a house. They are now paying pretty sizeable rent, paying a hefty amount of tax on their rental income, paying high childcare costs and still managing to save a deposit for a house. Renting long term doesn't suit them because of the uncertainty around being turfed out year on year. Rents are also going through the roof and will go higher because of these measures. This impacts on their ability to save - A vicious circle so to speak.

And if this measure had have been in play way back then, it's quite likely that there would have been one of two alternative outcomes;

1. They may have found that they would have ended up in a property that met their needs - which evidently wasn't an apartment (on the basis that there is every reason to believe same would have been that much more affordable).

2. Negative equity would not have played out to the same level as they are experiencing today.

P. Breathnach

It's a simple fact that in some places there are more would-be buyers than there are properties for sale. So, whatever is done or not done, some people will not be able to buy in their most-preferred location.

Suppose there is a prudent or fortunate house-hunter who has saved 20% of the price of a home, and has mortgage approval for the other 80%. What if a rival has lower savings but is willing to bid more on the basis of borrowing up to 90% of the price? Does our prudent purchaser decide to be less prudent? That's the road to perdition.

Larry Wildman

accensi0n wrote: »

Were the kids planned? Buying an over priced apartment and then having kids probably wasn't the best decision. Would they have been better renting initially and then saving up for the house? Did they gamble with the apartment purchase in the hope of flipping it?

Your post is ridiculous.

quadrifoglio verde

Larry Wildman wrote: »

Your post is ridiculous.

Well in fairness to that poster, if they were planned, they probably shouldn't have bought a property that in their eyes wasn't suitable to raise a family in.
Sometimes fundamental foundations of Irish life can really screw up your life

Larry Wildman

quadrifoglio verde wrote: »

Well in fairness to that poster, if they were planned, they probably shouldn't have bought a property that in their eyes wasn't suitable to raise a family in.
Sometimes fundamental foundations of Irish life can really screw up your life

Nobody could have predicted the scale of the collapse of the Irish economy.

In a world where tenants have f..k all protection, the people who bought apartments were prudent and responsible. Agent provocateurs hurl accusations of attempts to "flip" the apartments but that's horse manure. Those people were just doing what generations before them had done. When society is forced to hold off on having kids because of a pinch in the property market (e.g. a cohort trapped in apartments), other societal issues arise. The heartlessness of some people is breathtaking.

El_Dangeroso

Larry, don't you understand that the same cohort of people are competing for the same houses? And if you give everyone more spending power prices just rise (because this country seems incapable of making a rational decision about propterty).

Michael D Not Higgins

@Larry

The CB regulations don't apply to those in negative equity.

matt-dublin

Michael D Not Higgins wrote: »

@Larry

The CB regulations don't apply to those in negative equity.

It doesn't matter if the apartments they own cant be purchase because of the 20% rules.

matt-dublin

El_Dangeroso wrote: »

Larry, don't you understand that the same cohort of people are competing for the same houses? And if you give everyone more spending power prices just rise (because this country seems incapable of making a rational decision about propterty).

20% is too much, way too much. We've gone about turn, from. 110% mortgages to 80. 10% deposits are fine IMO, work pretty well in a lot of other countries.

While people in the boom may have been greedy let's not forget it wasn't the average house buyer that got this country to the state it's in, is was the developers, Anglo and Bertie's crew.

People were buying because they were told to, even yer man on tv3 was at it! What's his name, the financial adviser???

P. Breathnach

matt-dublin wrote: »

...
While people in the boom may have been greedy let's not forget it wasn't the average house buyer that got this country to the state it's in, is was the developers, Anglo and Bertie's crew.

People were buying because they were told to, even yer man on tv3 was at it! What's his name, the financial adviser???

There were many people to blame, including "the average house buyer". Had those buyers been wise, then developers, bankers, politicians, journalists, and the rest of them would not have been able to talk the market up to insane levels.

We are seeing some similar buyer panic again.

Michael D Not Higgins

matt-dublin wrote: »

20% is too much, way too much. We've gone about turn, from. 110% mortgages to 80. 10% deposits are fine IMO, work pretty well in a lot of other countries.

Why is 20% too much? 20% was pretty standard before the housing bubble. Looking at the UK, their average is 20% with the lowest interest deals for 40% deposits in some cases.

Why are 10% deposits fine in your opinion? The CBI are using established economic theory to regulate the industry, not just a layman's opinion. Also if you read the paper, it lists a number of countries that have similar LTV and LTI limits.

There is a large literature addressing the effectiveness of macro-prudential measures for the housing sector. The cited IMF survey highlights that a number of studies have empirically found that a tightening of LTV and DTI ratios can slow the growth rate of mortgage loans, and reduces the potential for a housing bubble to emerge. It also examines the growing body of evidence that shows the benefit of LTV and DTI ratios in reducing the severity of downturns, fire-sale dynamics and loan losses when the housing market turns. Hong Kong has had a LTV cap in place since 1994 and suffered very low mortgage losses after the Asian crisis even though housing prices fell more than 60 per cent.

Balmed Out

matt-dublin wrote: »

20% is too much, way too much. We've gone about turn, from. 110% mortgages to 80. 10% deposits are fine IMO, work pretty well in a lot of other countries.

While people in the boom may have been greedy let's not forget it wasn't the average house buyer that got this country to the state it's in, is was the developers, Anglo and Bertie's crew.

People were buying because they were told to, even yer man on tv3 was at it! What's his name, the financial adviser???

I cant understand anyone buying a house without having saved 20 % to be honest. I first got mortgage approval in 2004 and have yet to buy. I didnt at the time as I felt prices were far too high and I wasnt prepared to be stuck in a box. Since ive moved to another area where there just is very limited supply of suitable houses so there hasnt been much ive wanted to buy. There were plenty more who were prudent and did the same. Those who were not so prudent are the root cause, fair enough they shouldnt have been allowed to behave as they did but no one forced anyone to buy a house.

matt-dublin

Michael D Not Higgins wrote: »

Why is 20% too much? 20% was pretty standard before the housing bubble. Looking at the UK, their average is 20% with the lowest interest deals for 40% deposits in some cases.

Why are 10% deposits fine in your opinion? The CBI are using established economic theory to regulate the industry, not just a layman's opinion. Also if you read the paper, it lists a number of countries that have similar LTV and LTI limits.

I'm sorry but please gets your facts straight. The standard in the Uk is 90% LTV and has been for years.

A quick search on money supermarket.com returns over 400 mortgage products at 90%ltv

http://www.moneysupermarket.com/mortgages/search/results/?goal=MOR_FTB

Buyers already have to have over 20% when you take into account fees, renovations furniture etc. now they. 90% LTV is a fine standard imo

matt-dublin

matt-dublin wrote: »

20% is too much, way too much. We've gone about turn, from. 110% mortgages to 80. 10% deposits are fine IMO, work <snip>

I've a friend who doesn't earn much, pays extortionate rent and has three kids. Yet he has saved 5% of the house he wants (a 4-bed detached in Howth). Your 10% rule discriminates against him and is an outrage.

matt-dublin

[Deleted User] wrote: »

I've a friend who doesn't earn much, pays extortionate rent and has three kids. Yet he has saved 5% of the house he wants (a 4-bed detached in Howth). Your 10% rule discriminates against him and is an outrage.

You do realise that all of this won't lower hourlong prices??

Sure look at London where a dingy 1 bed flats in Balham go for over a million pounds!!! 3 bed houses in excess of several million. For absolute sh1tholes!

Cuddlesworth

matt-dublin wrote: »

I'm sorry but please gets your facts straight. The standard in the Uk is 90% LTV and has been for years.

A quick search on money supermarket.com returns over 400 mortgage products at 90%ltv

http://www.moneysupermarket.com/mortgages/search/results/?goal=MOR_FTB

Buyers already have to have over 20% when you take into account fees, renovations furniture etc. now they. 90% LTV is a fine standard imo

Thats not what he meant and you know it.

"that the number of first-time buyers taking out loans in January was up by 38% on the same month last year, and the average loan-to-value they were borrowing had increased from 80% to 82%."

Facing 20% year on year increases in certain markets, coupled with the possibility of another crash it is in Irelands best interests to curb the massive price increases and ensure that any more crashes don't cripple the banks loan books. Since both the purchasers and the banks seem incapable of actually doing that, so its up to the regulator to put caps on the market.