Central Bank to limit amount banks lend for home purchase

Greyian

Deleted User wrote: »

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.

According to that link, the national rise in prices has been 16.3% in the last year. This would be the highest rise in prices since the year 2000 (assuming this is accurate: http://www.moneyguideireland.com/house-price-changes-in-ireland-a-history.html). It's actually terrifying really.

Homer101

Does anybody do any work?

Michael D Not Higgins

Deleted User wrote: »

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.

This is going around in circles. The 90k came from someone mentioning a 350k property with 10% deposit, hence 90k income for 3.5 LTI.

I also went into detail on what someone on 36k could afford and what level they would have to save to get another 10% (i.e. 600/month for two years) which was also reasonable enough.

This is all beside the point though. It was a short exercise to show that at the level of borrowing they could afford at 3.5 LTI, they should not have a problem saving an additional 10%. The point is that the stability that the LTV brings to the market is the reason the CBI are enforcing it.

Sure there will be cases where someone on 90k will have to take care of an elderly parent, rent at €2500/month, drive a 141 BMW, drink 6 days a week with work people and pay 10k a year for golf membership, but maybe they should have prioritised saving for a house before all their other expenses consumed their take home pay.

Ush1

Michael D Not Higgins wrote: »

This is going around in circles. The 90k came from someone mentioning a 350k property with 10% deposit, hence 90k income for 3.5 LTI.

I also went into detail on what someone on 36k could afford and what level they would have to save to get another 10% (i.e. 600/month for two years) which was also reasonable enough.

This is all beside the point though. It was a short exercise to show that at the level of borrowing they could afford at 3.5 LTI, they should not have a problem saving an additional 10%. The point is that the stability that the LTV brings to the market is the reason the CBI are enforcing it.

Sure there will be cases where someone on 90k will have to take care of an elderly parent, rent at €2500/month, drive a 141 BMW, drink 6 days a week with work people and pay 10k a year for golf membership, but maybe they should have prioritised saving for a house before all their other expenses consumed their take home pay.

The struggle is real.:pac:

Greyian

Ush1 wrote: »

The struggle is real.:pac:

I can't believe he hasn't allowed for their cocaine habit too. For shame Michael, for shame.

Ogham

Greyian wrote: »

According to that link, the national rise in prices has been 16.3% in the last year. This would be the highest rise in prices since the year 2000 (assuming this is accurate: http://www.moneyguideireland.com/house-price-changes-in-ireland-a-history.html). It's actually terrifying really.

Fixed that link for ya - http://www.moneyguideireland.com/house-price-changes-in-ireland-a-history.html

Greyian

Ogham wrote: »

Fixed that link for ya - http://www.moneyguideireland.com/house-price-changes-in-ireland-a-history.html

Cheers, I've updated my post now too. Thanks

MayBea

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.

Greyian wrote: »

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.

I should've clarified the 293k, this is the loan portion of his mortgage:
367 * 80/100 = 293.6k (The deposit he would require under the rules is 73.4k)

(Thanks for the thorough breakdown of repayments!)

El_Dangeroso

Patrick Honohan appearing at the oireachtas committee right now. Live stream here:

http://www.oireachtas.ie/parliament/watchlisten/live-flashplayer/committeeroom4/

Sounds like this is coming in pretty much as is - although he said getting it in force by Jan 1 might pose practical challenges. Keen to get it in asap in new year. Hmmm...

Still, he's not for turning as far as I can see. Also not into a state-backed mortgage insurance scheme; nor is he convinced of the value of private mortgage insurance.

El_Dangeroso

Apparently will be not be introduced by January 1st due to practical reasons.

He also rubbished that this was unfair on the less well off, stating that mortgage debt is the worst way to try and resolve social inequality, saying it actually increases social inequality.

gmisk

http://www.centralbank.ie/press-area/speeches/Pages/OpeningStatementbyGovernorPatrickHonohantotheOireachtasJointCommitteeonFinance26nov14.aspx
The opening statement....is err kinda confusing.

Accordingly, after making any appropriate refinements (for example, in relation to first time buyers, and to the potential future use of private mortgage insurance as floated in the consultation paper), we will move quickly to confirm the parameters of the standing regime.

Would this not suggest FTB might possibly be exempt from the 20% deposit?

Strange one alright. He seems pretty hardline on it - defending the proposal, dismissing the idea of postponing it until mortgage insurance is sorted, saying giving people credit does them no favours.

He also noted that based on last year's numbers only a couple of thousand people would be affected.

Exempting FTBs or making lighter rules for them would make them worthless. Can't imagine that's what he means. But it is a curious thing to specify in a prepared statement.

Sala

90k Joe better get saving. He is basically saying they have to protect people from themselves. It's true. I feel sorry for anyone struggling to save but I am a potential FTB and have to continue to save for at least another year I'd say but I'll eventually be happy if house prices become more affordable, and I am not suckered into bidding up to silly x5 times income multiples. Short term pain and all that

seamus

So Paddy Honohan says that they're extending the consultation period for this to some undetermined time early next year. Presumably due to political pressure and banks taking him out for nice meals to discuss their "issues" with this.
http://www.independent.ie/business/personal-finance/property-mortgages/central-bank-head-admits-new-mortgage-deposit-rules-face-delays-30778393.html

I also find this choice quote interesting:

Mr Honohan told an Oireachtas Committee yesterday that the move would affect only a "relatively small number of people". He said that last year, the number of loans of more than 80pc to first-time buyers was 2,800.

"That's the number of loans that would have been affected. It's not like hundreds of thousands of people are affected by this," he said.

There were 14,985 loans issued in 2013, of which 52% were to first time buyers URL="http://www.finfacts.ie/irishfinancenews/article_1027275.shtml"]source[/URL. That's 7,792 FTB mortgages. Which means that 36% of all FTB mortgages exceed 80% LTV.

So this new rule does have the potential to affect a lot of buyers. But I suspect Mr. Honohan knows this, and is playing it down. What game is he playing?

seamus

seamus wrote: »

So Paddy Honohan says that they're extending the consultation period for this to some undetermined time early next year. Presumably due to political pressure and banks taking him out for nice meals to discuss their "issues" with this.
http://www.independent.ie/business/personal-finance/property-mortgages/central-bank-head-admits-new-mortgage-deposit-rules-face-delays-30778393.html

I also find this choice quote interesting:There were 14,985 loans issued in 2013, of which 52% were to first time buyers URL="http://www.finfacts.ie/irishfinancenews/article_1027275.shtml"]source[/URL. That's 7,792 FTB mortgages. Which means that 36% of all FTB mortgages exceed 80% LTV.

So this new rule does have the potential to affect a lot of buyers. But I suspect Mr. Honohan knows this, and is playing it down. What game is he playing?

No, the consultation period ends December 6 as planned. He just said that for technical reasons bringing it in on Jan 1 could be a bit of a push but 'we're not hanging around'. It did always look a bit ambitious. They've only two weeks between the end of consultation and the Christmas break.

Pearse Doherty asked him to put the whole thing off for a few months to give more time to work out how a mortgage insurance scheme would operate. Honohan said 'no' - kicking it to touch would mean it never got done. If we don't do it now, we never will (or words to that effect).

makeorbrake

Deleted User wrote: »

Pearse Doherty asked him to put the whole thing off for a few months to give more time to work out how a mortgage insurance scheme would operate. Honohan said 'no' - kicking it to touch would mean it never got done. If we don't do it now, we never will (or words to that effect).

How true that is! other interests trying to kick the can down the road on this -and then use that time to either get it shelved completely or fudged/watered down.

wow...could it possibly be?...a regulator actually regulating? Not a done deal yet but so far so good Honahan.

Theboinkmaster

Paddy Honohan is a legend. Bring these rules in ASAP please.

The Spider

Sala wrote: »

90k Joe better get saving. He is basically saying they have to protect people from themselves. It's true. I feel sorry for anyone struggling to save but I am a potential FTB and have to continue to save for at least another year I'd say but I'll eventually be happy if house prices become more affordable, and I am not suckered into bidding up to silly x5 times income multiples. Short term pain and all that

They won't become more affordable in Dublin, can't see it, not without a dramatic increase in supply, and any increase in supply certainly won't be in the favoured SCD or Dublin east coast spots, more likely outside the m50 and towards the west, supply can increase up and down the east coast, may be more palatable to people but increases within the M50 look unlikely.

http://www.daft.ie/dublin-city/houses-for-sale/south-dublin-city/?s%5Barea_type%5D=on&s%5Badvanced%5D=1&s%5Bpt_id%5D%5B0%5D=5

http://www.daft.ie/dublin-city/houses-for-sale/south-co-dublin/?s%5Bpt_id%5D=5&s%5Barea_type%5D=on&s%5Badvanced%5D=1

http://www.daft.ie/dublin-city/houses-for-sale/north-dublin-city/?s%5Bpt_id%5D=5&s%5Barea_type%5D=on&s%5Badvanced%5D=1

http://www.daft.ie/dublin-city/houses-for-sale/north-co-dublin/?s%5Bpt_id%5D=5&s%5Barea_type%5D=on&s%5Badvanced%5D=1

The above are sites currently available on Daft in the Dublin region, doesn't take into account NAMA land but even going on that snapshot, there really doesn't seem to be enough available land for any significant development especially at the levels required on a yearly basis.

http://www.independent.ie/business/personal-finance/building-blitz-needed-to-meet-demand-for-housing-30486157.html

The above link says how many house are required in the next 7 years (90,000) and 86 percent are required in Dublin, I don't know where you'll put them.

seamus

The Spider wrote: »

I don't know where you'll put them.

See this?
https://www.google.ie/maps/place/Britain+Quay,+South-East+Inner+City,+Dublin/@53.3448864,-6.2353254,177m/data=!3m2!1e3!4b1!4m2!3m1!1s0x48670eedba3b260f:0x28b4b0d58f41a2c8

It's an empty lot, on prime land in Dublin. Ripe for apartments.

Rough guess, looking at the scale, that lot is about 75mx75m. Take away 10% just because and you get 4,556 sq m.

30 apartments of 100 sq. m. each plus ancillary works, would fit nicely in there.

Multiplied by fifty floors == 1,500 apartments. Ideally and centrally located.

And there is no good damn reason why not. And there are plenty of more pieces of wasteland around the city like this which can be used to build blocks of 15 floors, it doesn't have to be a huge building.

No, not everybody wants to live in the city centre and not everybody wants an apartment. But there is an issue of people who want to live in the city but can't afford to, occupying properties outside of the city. Make more property available in the city, and people will move in from the suburbs, freeing up properties outside of the city.

The Spider

seamus wrote: »

See this?
https://www.google.ie/maps/place/Britain+Quay,+South-East+Inner+City,+Dublin/@53.3448864,-6.2353254,177m/data=!3m2!1e3!4b1!4m2!3m1!1s0x48670eedba3b260f:0x28b4b0d58f41a2c8

It's an empty lot, on prime land in Dublin. Ripe for apartments.

Rough guess, looking at the scale, that lot is about 75mx75m. Take away 10% just because and you get 4,556 sq m.

30 apartments of 100 sq. m. each plus ancillary works, would fit nicely in there.

Multiplied by fifty floors == 1,500 apartments. Ideally and centrally located.

And there is no good damn reason why not. And there are plenty of more pieces of wasteland around the city like this which can be used to build blocks of 15 floors, it doesn't have to be a huge building.

But are they for sale? Could very well be controlled by NAMA, a in that location like it or not is going to command premium prices for anything built there, 30 apartments, in around Google and the IFSC would be worth a fortune.

The other side is that a location like that is prime for development of another Tech Office or MNC if they decide Dublin is the location for them, in fact I'd say this is the more likely scenario, possibly even another hotel to rival the Marker, one thing central Dublin doesn't have is enough high end 5 star hotels.

jay0109

Directly across the river, between the IFSC and the Point. Large sites there ready for Apt buildings for the last 10 years. Could fit thousands of Apt's in there...but no, the Govt sits on the land while prices soar.
Joke

seamus

The Spider wrote: »

But are they for sale? Could very well be controlled by NAMA, a in that location like it or not is going to command premium prices for anything built there, 30 apartments, in around Google and the IFSC would be worth a fortune.

The other side is that a location like that is prime for development of another Tech Office or MNC if they decide Dublin is the location for them, in fact I'd say this is the more likely scenario, possibly even another hotel to rival the Marker, one thing central Dublin doesn't have is enough high end 5 star hotels.

Yes it is prime land, and it probably would be expensive. But you're asking the question of where we're going to put homes and I've shown you an enormous piece of empty land right in the city centre - one of many such places.

There is plenty of land still in Dublin to build homes, the question is not where are we going to build them, the question is why we are not building them. And I think most fingers can point back to land hoarding; either by NAMA or by other vested interests.

We need to start putting massively punitive taxes on land which is zoned residential but not being used. Make it so that you can only profit from land if you build on it, merely speculating on it should not be enough to make it profitable.

The Spider

seamus wrote: »

Yes it is prime land, and it probably would be expensive. But you're asking the question of where we're going to put apartments and I've shown you an enormous piece of empty land right in the city centre - one of many such places.

There is plenty of land still in Dublin to build homes, the question is not where are we going to build them, the question is why we are not building them. And I think most fingers can point back to land hoarding; either by NAMA or by other vested interests.

We need to start putting massively punitive taxes on land which is zoned residential but not being used. Make it so that you can only profit from land if you build on it, merely speculating on it should not be enough to make it profitable.

The clue being in the name, NAMA National Asset Management Agency, if it is owned by NAMA, then they'll want maximum return for the taxpayer, however that site whoever owns it is too valuable, any property there is going to command a huge premium. Any apartments will be either built by developers to rent to tech workers or as I said office or hotel space.

A better find if you can find any, I don't know would be sites in already established residential areas that people would want to live in, sites in Dundrum, Rathfarnham, Sandyford, usual spots southside. Or anywhere within Drumcondra, Clontarf, Sutton, Raheny, Artane even out as far as Swords on the Northside.

The Spider

jay0109 wrote: »

Directly across the river, between the IFSC and the Point. Large sites there ready for Apt buildings for the last 10 years. Could fit thousands of Apt's in there...but no, the Govt sits on the land while prices soar.
Joke

Any land there, is more than likely earmarked for office space, if Dublin continues to attract tech giants that want offices centrally located then the land has to be available to build them, that land is more valuable as office space than for apartments, in terms of job creation and to the economy. I don't think you'll see apartments down that neck of the woods any time soon.

That whole area is Silicon Ireland

jay0109

They can keep building offices all they want- as we now know from the recent Primetime show on the property crisis, the MNC's aren't happy about the shortages and difficulties their employees are facing ....50 people from the 1 tech company showed up to view the same house on a Saturday recently!

So start building apartments or else...

The Spider

jay0109 wrote: »

They can keep building offices all they want- as we now know from the recent Primetime show on the property crisis, the MNC's aren't happy about the shortages and difficulties their employees are facing ....50 people from the 1 tech company showed up to view the same house on a Saturday recently!

So start building apartments or else...

They will build them, but they'll be outside that area, that's too prime a location and like I say if anything residential is built there, it'll command a massive premium, so not exactly the kind of property most people are seeking.

Personally I think a lot of these bigger companies might be better served with offices on the m50, easier to get in and out of (if your driving). Problem with that though is that it removes the social aspect of work which a lot of tech companies encourage especially with a young workforce.

Dublin is full in the city centre apart from those sites, but I don't think they're a runner, if there was a downturn you'd be left with loads of occupied/unoccupied apartments on prime city centre land.

leinsterdude

How much ?
If two earners both ear €40 k each
How much can they borrow next year ?
Sorry if they have €25k saved that is

Balmed Out

leinsterdude wrote: »

How much ?
If two earners both ear €40 k each
How much can they borrow next year ?
Sorry if they have €25k saved that is

3.5 times 80k = 280k.
25* 5 = 125k
lower amount is 125 but there will be a fair bit of leeway.

seamus

leinsterdude wrote: »

How much ?
If two earners both ear €40 k each
How much can they borrow next year ?
Sorry if they have €25k saved that is

Assuming the rules are what come in, then €80k * 3.5 is €280k.

But since the deposit needs to be 20% of the house price and you have €25k, then your maximum borrowing is €100k.

However, the rules aren't fixed. Since your earnings would easily cover the larger mortgage and lower LTV, you'd probably be able to get up to €200k, IMO.