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Central Bank to limit amount banks lend for home purchase
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desertcircus wrote: »Treble the median salary should really be enough to allow a single person with no children to save enough for a deposit. Saying so isn't idiotic, it's basic mathematics.
I do agree that 90k as a single person leaves plenty of leeway for savings.
However, I'll restate that glib 'calculations' about the cost of living are not helpful, and I wonder if the people who make them are living in the real world (as in running a household - even if only a household of one) rather than making frequent visits to the bank of mum and dad. Or living with them.0 -
[Deleted User] wrote: »I do agree that 90k as a single person leaves plenty of leeway for savings.
However, I'll restate that glib 'calculations' about the cost of living are not helpful, and I wonder if the people who make them are living in the real world (as in running a household - even if only a household of one) rather than making frequent visits to the bank of mum and dad. Or living with them.
My wife and I are living together and don't get help from parents, and our living costs are so far below the numbers being bandied about here as to be unrecognisable as the same expense. Someone who is seriously saving up a deposit does not spend a thousand quid a year on phone bills. They don't go out for dinner and drinks twice a week. They make their own lunches, they cycle to work, and they reduce their spending in simple ways that add up. Of course saving for a deposit is hard: you're trying to save tens of thousands of euro, and pretending you can do that while making no effort to limit your outgoings is pointless.0 -
There was a program on RTE some three weeks ago with statistics around those with the mortgage arrears. It was mentioned as an objective fact that 10%-ters with 3.5 x income are not among them (very few cases).
What was the programme?
This Central Bank report (page 9) from earlier this year says that in all the literature, housing equity has a positive impact on the probability of experiencing mortgage arrears.
They even have an equation for it, the math-mad bastards: 'A one unit increase in the log of the current LTV ratio raises the probability of mortgage arrears by 8%.'0 -
Deleted User wrote: »Going on holiday (or do working people not deserve holidays anymore?). The myriad of unexpected expenses associated with white or brown good breaking, having to travel for weddings and funerals, clothes (which he probably needs to spend a decent amount on if he's in a 90k a year job), shoes (that wear out), looking after less fortunate family members, buying his lunch when he's working, etc etc
I love these people who do this idiotic wages minus rent minus 50 quid a week on food = loads of money to save for a house! Try living in the real world...
He deserves his foreign holidays, he's entitled to a good car, he has every right to socialise regularly in his new suit, he should expect to go to all his old friends' weddings abroad, and even his family deserve to be looked after.
And most of all her has a right to nice big south-facing house - in a good area, obviously - with four bedrooms, not too far from work. Now please.0 -
Where is this fictional guy's partner in this? If they are working then they can contribute toward savings, if not they should marry and take advantage of the tax credits to vastly improve his take home.
Single buyers are at a disadvantage in every property market, twas ever thus.0 -
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Thanks for that Ixelles, very interesting! I don't know what was the programme (a family member reported it to me, I will try to find out), but it was mentioned that the major portion chunk was made of people with 100% mortgages and BTLetters.Deleted User wrote: »What was the programme?
This Central Bank report (page 9) from earlier this year says that in all the literature, housing equity has a positive impact on the probability of experiencing mortgage arrears.
It is quite remarkable thatHigher education levels are associated with a lower probability of arrears relative to borrowers with lower education levels.
Aside from education, we also find that having dependent children increases the chances of
mortgage arrears by 5 per cent.
I find this document interesting as well Dis-entangling the mortgage arrears crisis: The role of the labour market, income volatility and negative equity (sorry, cannot attach urls as a new user)0 -
There was a program on RTE some three weeks ago with statistics around those with mortgage arrears. It was mentioned as an objective fact that 10%-ters with 3.5 x income are not among them (small percentage).
You obviously haven't read the Central Bank's proposal document, as Ixelles has helpfully posted the relevant section I won't cover it again. However you can see from their graphs that the majority of the 90%LTV 3.5 LTI mortgages are pre-bubble, so of course they're not in trouble.
You haven't grasped that these are holistic measures that address both individual affordability in the LTI and market wide stability in the LTV.0 -
You do seem to be right and my source of information questionable...:Deleted User wrote: »This Central Bank report[/URL] (page 9) from earlier this year says that in all the literature, housing equity has a positive impact on the probability of experiencing mortgage arrears.
No Arrears Any Arrears
Current LTV (%) Positive Equity
0-50 33.4 25.0
51-80 19.2 22.5
81-90 5.6 5.6
Thanks, Michael D Not Higgins, studied it now.Michael D Not Higgins wrote:You obviously haven't read the Central Bank's proposal document0 -
Michael D Not Higgins wrote: »I'm not defending the position. I refused to buy in 2008 despite pressure from my family to 'get on the property ladder'. If I had I'd be burdered with a 300k mortgage for a 2 bed box apartment in negative equity.
Many other believed (and now still believe despite the bubble and burst) that prices will continue to rise forever and the only way to ever own property is to buy immediately.
If prices remained static this wouldnt be an issue. Prices never remain static.0 -
Deleted User wrote: »The Spider must live some life, if he thinks that those are normal figures.
€40 phone, unlimited data with 3.
Don't go out on the rip every week.
Own my car (at 90k potentially even has company car/phone)
Crazy lekky and heat assessment 220!!
€400 on food??? has he ever heard of Lidl?
I agree strip out the phone, I have a work phone too, but if I was paying for my bills, it'd easily be in excess of 80 euro, foreign calls and all that, making the assumption Joe'd make the same calls.
http://www.irishexaminer.com/ireland/electricity-and-gas-costs-up-200-in-past-year-233268.html
According to the above average electricity prices winter are 96 euro a month gas is 126 granted they diminish in summer, but my point stands.
Now Joe has a 90 grand a year job it's not unreasonable that he needs to have a decent car, any second hand Audis, BMW's or mercy are going to be in excess of 15 grand, and need to be replaced every few years, alternatively he can lease. Either way it's a cost.
Now as to the poster who said someone saving for a house doesn't go out twice a week, Ihave news they do. Any high paying job a certain amount of socialising is more than expected, personal experience here.
Then there's the travel, sure you can expense stuff but inevitably every time you go to London or elsewhere you'll drop 100 euro on either going for a few drinks, buying something in the airport etc. Anyone who says you don't have to go for drinks, isn't living in the real world and hasn't been in the situation.
As for food, easy 100 euro a week, not everyone wants to eat mince and cans of tuna, life's too short, chicken breast, steak, cheese, fish all gonna cost, and if you're doing any kind of weight lifting increase the amount again. Veg is cheap everywhere.
Now going out two nights a week really isn't that much and you will easily drop another 100 conservatively speaking, and if people were honest they would say that's conservative.
Now any one on 90 grand wants to protect it and will do what's necessary including the socialising, but there's a cost.0 -
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The house price is now 367k (moderate growth of 2.5% a year), therefore: instead of getting the house for 350k in 2015 he gets it in 2017 for : 367k + 28.8k (the rent he paid)= 395.8k
I don't think this is a fair reflection on the "cost" of the house in 2 years. You add on the rent he would have paid. Surely you should take away the mortgage interest he would have paid had he bought the house.
People go on about rent being dead money. Don't forget the majority of your early mortgage repayments are interest.0 -
Spider...let this one go!0
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I don't think this is a fair reflection on the "cost" of the house in 2 years. You add on the rent he would have paid. Surely you should take away the mortgage interest he would have paid had he bought the house.
I agree, this is a very basic sketch. There would be a bunch of other characteristics that could be included, I didn't go in particulars. But yes.. perfectly valid point, his mortgage is now for 293k rather than 315k, therefore the interest rate differs etc.0 -
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The Spider wrote: »Ah maybe your right, you should be saving maybe 900 to a grand, 1500 too much, but if you can fair play.
You just couldn't:rolleyes:0 -
Nope...0
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I agree, this is a very basic sketch. There would be a bunch of other characteristics that could be included, I didn't go in particulars. But yes.. perfectly valid point, his mortgage is now for 293k rather than 315k, therefore the interest rate differs etc.
Actually, his mortgage would be for ~€306,000 after 2 years. Only €9,000 of the repayments would have gone to paying down the balance. Over €1000.00 per month (roughly €25,000 over the first 2 years) would have gone on paying interest.0 -
The Spider wrote: »I agree strip out the phone, I have a work phone too, but if I was paying for my bills, it'd easily be in excess of 80 euro, foreign calls and all that, making the assumption Joe'd make the same calls.
http://www.irishexaminer.com/ireland/electricity-and-gas-costs-up-200-in-past-year-233268.html
According to the above average electricity prices winter are 96 euro a month gas is 126 granted they diminish in summer, but my point stands.
Now Joe has a 90 grand a year job it's not unreasonable that he needs to have a decent car, any second hand Audis, BMW's or mercy are going to be in excess of 15 grand, and need to be replaced every few years, alternatively he can lease. Either way it's a cost.
Now as to the poster who said someone saving for a house doesn't go out twice a week, Ihave news they do. Any high paying job a certain amount of socialising is more than expected, personal experience here.
Then there's the travel, sure you can expense stuff but inevitably every time you go to London or elsewhere you'll drop 100 euro on either going for a few drinks, buying something in the airport etc. Anyone who says you don't have to go for drinks, isn't living in the real world and hasn't been in the situation.
As for food, easy 100 euro a week, not everyone wants to eat mince and cans of tuna, life's too short, chicken breast, steak, cheese, fish all gonna cost, and if you're doing any kind of weight lifting increase the amount again. Veg is cheap everywhere.
Now going out two nights a week really isn't that much and you will easily drop another 100 conservatively speaking, and if people were honest they would say that's conservative.
Now any one on 90 grand wants to protect it and will do what's necessary including the socialising, but there's a cost.
If your phone bill is €80/month, and that's personal use, you're spending a huge amount of money you don't need to. Get a phone with a decent data package and you can use Skype/Viber for free to call people in other countries. Even if they don't have Skype/Viber, you pay about €0.05/minute to call their mobile through Skype.
If its for work use, you should either be provided with a phone+plan, or be claiming those expenses.
That link would include households with multiple people, a single person's bills should be way lower (especially if they are living in an apartment).
I bought a 2008 BMW 3 Series a month ago, for €10,000. There is no need to be spending €15k+ on a used car, especially not every few years.
Loads of people, who aren't even trying to save, don't go out socialising twice a week. No-one in my office goes out regularly, especially not because "a certain amount of socialising is expected".
And who drops 100 euro, when trying to save, "going for a few drinks". Since when is 20 drinks a few?
As for food costs, any decent butcher or supermarket will offer 5 for €5 on chicken breasts. A dinner of 3 chicken breasts, with some rice/potatoes and a salad or mixed vegetables can be made for ~€5. Replace the rice/potatoes and mixed vegetables with chips and it probably even reduces the cost. Burgers can be made for ~€1.50 each (cheaper again if you're actually making your own burger patty from mince at home).
If someone is on €90,000 and is struggling to save €1500/month towards a deposit, it's because they're not really bothered saving at all.0 -
If your phone bill is €80/month, and that's personal use, you're spending a huge amount of money you don't need to. Get a phone with a decent data package and you can use Skype/Viber for free to call people in other countries. Even if they don't have Skype/Viber, you pay about €0.05/minute to call their mobile through Skype.
If its for work use, you should either be provided with a phone+plan, or be claiming those expenses.
That link would include households with multiple people, a single person's bills should be way lower (especially if they are living in an apartment).
I bought a 2008 BMW 3 Series a month ago, for €10,000. There is no need to be spending €15k+ on a used car, especially not every few years.
Loads of people, who aren't even trying to save, don't go out socialising twice a week. No-one in my office goes out regularly, especially not because "a certain amount of socialising is expected".
And who drops 100 euro, when trying to save, "going for a few drinks". Since when is 20 drinks a few?
As for food costs, any decent butcher or supermarket will offer 5 for €5 on chicken breasts. A dinner of 3 chicken breasts, with some rice/potatoes and a salad or mixed vegetables can be made for ~€5. Replace the rice/potatoes and mixed vegetables with chips and it probably even reduces the cost. Burgers can be made for ~€1.50 each (cheaper again if you're actually making your own burger patty from mince at home).
If someone is on €90,000 and is struggling to save €1500/month towards a deposit, it's because they're not really bothered saving at all.
Last time that I was saving really heavily I was only on no where near 90K and was popping almost a grand a month into savings (without the need to cut back much at all)0 -
If your phone bill is €80/month, and that's personal use, you're spending a huge amount of money you don't need to. Get a phone with a decent data package and you can use Skype/Viber for free to call people in other countries. Even if they don't have Skype/Viber, you pay about €0.05/minute to call their mobile through Skype.
If its for work use, you should either be provided with a phone+plan, or be claiming those expenses.
That link would include households with multiple people, a single person's bills should be way lower (especially if they are living in an apartment).
I bought a 2008 BMW 3 Series a month ago, for €10,000. There is no need to be spending €15k+ on a used car, especially not every few years.
Loads of people, who aren't even trying to save, don't go out socialising twice a week. No-one in my office goes out regularly, especially not because "a certain amount of socialising is expected".
And who drops 100 euro, when trying to save, "going for a few drinks". Since when is 20 drinks a few?
As for food costs, any decent butcher or supermarket will offer 5 for €5 on chicken breasts. A dinner of 3 chicken breasts, with some rice/potatoes and a salad or mixed vegetables can be made for ~€5. Replace the rice/potatoes and mixed vegetables with chips and it probably even reduces the cost. Burgers can be made for ~€1.50 each (cheaper again if you're actually making your own burger patty from mince at home).
If someone is on €90,000 and is struggling to save €1500/month towards a deposit, it's because they're not really bothered saving at all.
there are still many, MANY things that aren't being included in these 'calculations'. hell even just considering the car you've got the annual cost of tax, servicing and insurance.
the cost of being ill hasn't been factored in but it can be significant.
somebody suggested that 100 euro on socialising is 'dinner and drinks two nights a week'. It isn't. In Dublin, certainly, it's dinner and drinks ONE night a week, unless you are going to Burger King. Don't forget getting out and back has to be included.
then we've got christmas coming up. I am sure Joe's friends and family (and girlfriend, if he has one) will be delighted to hear he is not buying them presents as he's saving for a house. What a guy!
As noted before, I am not saying that someone on 90k cannot afford to save, my issue is with the silly 'calculations' that are always based on the perfect weeks when nothing goes wrong, the tv license isn't due, etc etc. They don't reflect the cost of living, simple as that.
Lastly let's not forget that mr 90k is pretty atypical in all sorts of ways. The issue if for joe soap on the average national wage or even at 50 or 60k.
There does seem to be a huge number of people who think it is RIGHT and NORMAL that housing is so expensive, and that we just have to accept that we will live like wage slaves for years (your best years by the way, trust me I'm out the other side) in order to line the pockets of landowners and vested interests (which is what is happening).
I am not against the limits in principle, but for god's sake let's be as aggressive as possible in ensuring young people in this country are not thrown onto this treadmill just to put a roof over their heads.0 -
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Deleted User wrote: »there are still many, MANY things that aren't being included in these 'calculations'. hell even just considering the car you've got the annual cost of tax, servicing and insurance.
the cost of being ill hasn't been factored in but it can be significant.
somebody suggested that 100 euro on socialising is 'dinner and drinks two nights a week'. It isn't. In Dublin, certainly, it's dinner and drinks ONE night a week, unless you are going to Burger King. Don't forget getting out and back has to be included.
then we've got christmas coming up. I am sure Joe's friends and family (and girlfriend, if he has one) will be delighted to hear he is not buying them presents as he's saving for a house. What a guy!
As noted before, I am not saying that someone on 90k cannot afford to save, my issue is with the silly 'calculations' that are always based on the perfect weeks when nothing goes wrong, the tv license isn't due, etc etc. They don't reflect the cost of living, simple as that.
Lastly let's not forget that mr 90k is pretty atypical in all sorts of ways. The issue if for joe soap on the average national wage or even at 50 or 60k.
There does seem to be a huge number of people who think it is RIGHT and NORMAL that housing is so expensive, and that we just have to accept that we will live like wage slaves for years (your best years by the way, trust me I'm out the other side) in order to line the pockets of landowners and vested interests (which is what is happening).
I am not against the limits in principle, but for god's sake let's be as aggressive as possible in ensuring young people in this country are not thrown onto this treadmill just to put a roof over their heads.
If you're spending €100 on dinner+drinks for one night, you're going to pretty high end places. What's wrong with somewhere like Milano in Dundrum/Baggot Street/Dawson Street/Temple Bar. Or Yamamori on George's Street, can comfortably be done for €50 per person (which is what Joe should be averaging, he shouldn't just be paying for everyone else all the time).
The cost to insure and tax a BMW 3 Series is under €100 a month, speaking from experience. Add fuel of €150 a month (that's close to 2 full tanks) and it comes in at €250/month average, standard servicing and maintenance shouldn't add more than €50/month (remember, The Spider seems to be suggesting Joe change his car regularly, so if there are any major issues, he might just be better off getting a new one). The Spider's calculations also didn't allow for the fact that the car will have residual value when he's replacing it, which will reduce the cost of the new car.
If Joe spends €1200 on his friends/family on gifts (which is pretty generous, there's no need to spend huge amounts on gifts that most people don't really use all that often), it would come to €100/month. Between the exaggerations made on phone bill + socialising costs previously, that would easily be covered.
TV licence is about €12/month, it's negligible really in these kinds of conversations (have 2-3 fewer pints a month, and you're covered).
Health insurance can be purchased for under €50/month. The majority of people who are saving for a deposit will be reasonably young and most won't suffer from serious health complications (some will, yes, but it wouldn't be the norm).
As for the cost of housing being so high, you're right, it is. But the solution isn't to give *larger* mortgages, that makes the affordability worse, not better. You don't give someone on minimum wage a huge loan to purchase a Jaguar, you shouldn't give someone on low wages a 90% mortgage and 4-6 times annual income to buy a 3-4 bed semi-d.
If we want everyone to have semi-ds, we have to reduce the prices, not increase the mortgages.0 -
Round and round we go, so I'm getting off0
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It should't be a major trouble. However, even for the high-earner individual with 90K income it will result in the delay of buying the property for the minimum of two years.
Getting down to the numbers:
Joe gets 90K, which is something around 4,400 monthly roughly.
We can conservatively assume the rent of 1,200 being paid every month as well as the savings of 1,500 (which is slightly over than 1/3 of his salary).
He has the savings of 35K and now needs to double them, so.. another 35,000k / 1,500 = approx. 24 months of saving (AND paying the rent at the same time, which is 28,800k paid over this period).
The house price is now 367k (moderate growth of 2.5% a year), therefore: instead of getting the house for 350k in 2015 he gets it in 2017 for : 367k + 28.8k (the rent he paid)= 395.8k
I agree wholeheartedly with having a salary limitation. But I do think that the 20% deposit is not a runner.
Just to elaborate on this post actually, I've done some calculations now.
If Joe was to buy the house right now, with 10% deposit, he'd need to spend his €35,000 deposit, as well as take out a mortgage for €315,000. Over 35 years, he'd repay a total of €585790.98 (€1394.74/month) on the mortgage, bringing the total cost of buying the house to €620790.98 (deposit + total mortgage cost).
If Joe was to wait 2 years (to build up a deposit), he'd have a deposit of €71,000. He'd need a mortgage of €296,000 (new price of €367,000-€71,000 deposit). He could take this mortgage out over 35 years, but repay it over 31 years. This would make the monthly repayment €1389.64 (€5 lower than larger, 10% deposit mortgage). Over the 31 year life of the mortgage, he'd repay a total of €516944.33. The total cost for Joe to buy the house would work out at €616744.33 (€71000 deposit, €516944.33 total mortgage cost and €28800 rent for 2 years while saving).
As you can see, Joe would actually end up spending less to purchase the house, as well as being out of debt 2 years earlier (35 year immediate mortgage would end in 2049, while a 31 year mortgage taken out in 2 years time would end in 2047).
As well as this, Joe would also have the advantage of having more equity in the house at the time of purchase (and through the lifetime of the mortgage), meaning he would be in a much better position if he had to sell the house for some unforeseen reason.0 -
may have missed it but have you factored in the extra €1500 a month on rent over the extra saving period?0
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And I got pulled back in argh!0
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Deleted User wrote: »may have missed it but have you factored in the extra €1500 a month on rent over the extra saving period?
I used rent at €1200/month (that was the example MayBea originally gave), which over the 2 years comes out to €28800.
"The total cost for Joe to buy the house would work out at €616744.33 (€71000 deposit, €516944.33 total mortgage cost and €28800 rent for 2 years while saving)."
It's worth nothing that the cost comparisons would change, dependent on a number of factors.
If prices fall, or rise by less than 2.5%, the benefit to Joe would increase if he waits.
If prices rise by more than 2.5%, Joe would be better purchasing immediately (at roughly 2.75% or so, the 2 scenarios would be identical).
Interest rate changes could also affect the scenarios. If Joe opted for a fixed rate, if they fell over the 2 years, he'd have been better waiting. If they rose, he'd have been better earlier.
This doesn't factor in the increased equity by waiting though, which could be very beneficial in the event of Joe having to sell.0 -
I don't earn 90K a year and I have little trouble saving €1000 a month while renting.
I also spend more than €100 on food in a week :eek:0 -
I used rent at €1200/month (that was the example MayBea originally gave), which over the 2 years comes out to €28800.
"The total cost for Joe to buy the house would work out at €616744.33 (€71000 deposit, €516944.33 total mortgage cost and €28800 rent for 2 years while saving)."
Yup missed it cheers. Your rent is a bit low though (given that a 2 bed apartment in Tallaght is around that now)
Assuming that this guy is so status driven as the other posters suggest I am thinking a two bed in Dundrum or a house in Terenure/Templeogue0 -
Deleted User wrote: »Yup missed it cheers. Your rent is a bit low though (given that a 2 bed apartment in Tallaght is around that now)
Assuming that this guy is so status driven as the other posters suggest I am thinking a two bed in Dundrum or a house in Terenure/Templeogue
I'd agree that the rent could be higher (I was just taking the figures MayBea gave), but it could also be argued that a 2-bed wouldn't be a requirement. He could rent a 1 bed in Dun Laoghaire for about €1000 a month, which has reasonably good transport links.
Where he works should also affect his choice of location. The costs given for petrol earlier would assume a reasonable length commute (~15-20km/day), which wouldn't be necessary if he lived closer to work.0 -
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About this Central Bank proposal to limit lending for home purchases...
The bubble is getting bubblier:
Dublin prices up 3% in one month. 2.9% nationally.
CB Guv'nor Honohan is in front of the Oireachtas Committee this afternoon. No doubt the proposal will come up. If anything, the continued and accelerating surge in prices calls for intervention.
No doubt some of the TDs will cite a constituent of theirs who finds it hard to get on 'the ladder' but hopefully some will be concerned that the price rises are getting out of control.0
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