Central Bank to limit amount banks lend for home purchase

_Kaiser_

Zamboni wrote: »

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

Agreed..

All this will do is push the young/FTB out. Those cash-rich types who took the money and ran a few years back, investors and multinational property companies all stand to gain from this.

hmmm wrote: »

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

I fully agree that no-one NEEDS to own a house (as I've said here many times), BUT this move is not enough UNLESS they also make serious reforms of the private rental sector as well.

As it stands this will only put even more pressure on an already out-of-control situation in Dublin and the larger cities.

Zamboni

Balmed Out wrote: »

Your only one thanks from 50 now....

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

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

Spot on. Credit union loan for deposits and inter-generational finance.
The state seem very keen to get the over 50's to release money from their savings and investments into the property market.
State savings rates have dropped to almost zero.

hmmm

_Kaiser_ wrote: »

BUT this move is not enough UNLESS they also make serious reforms of the private rental sector as well.

As it stands this will only put even more pressure on an already out-of-control situation in Dublin and the larger cities.

It's out of control because we lack supply. Allowing FTBs to borrow unsustainable multiples of their income to compete with cash rich buyers isn't a solution either way, it just leads to more of the same misery we've already experienced. To say that this "helps" cash rich buyers/foreign investors, as if the measures are punishing FTBs, is extremely unfair.

_Kaiser_

hmmm wrote: »

It's out of control because we lack supply.

And there's nothing in this, or current government policy, to address this problem - indeed, didn't Noonan say a while back that the current spike in property value was a good thing

Allowing FTBs to borrow unsustainable multiples of their income to compete with cash rich buyers isn't a solution either way, it just leads to more of the same misery we've already experienced.

Agreed, but these people need to live and work too and pushing them out into surrounding counties (just like in the "good ole days") because they can't afford to buy in the city and rental prices are ridiculous isn't a solution either

To say that this "helps" cash rich buyers/foreign investors, as if the measures are punishing FTBs, is extremely unfair.

Life is rarely fair, but it's still true. This measure will only benefit them, even if indirectly.

on_my_oe

We already receive less than a non working couple, judging by the BMW driving social welfare claimants living in the apartment next door.

http://www.askaboutmoney.com/showthread.php?t=189409

The Central Bank is holding their briefing at 11.30am, so we'll know at lunchtime.

I'm hoping for 10% deposit, 4 x combined salary but what I think we'll get is 15% deposit and 3.5 times combined salary (maybe 4x)

Frank Lee Midere

on_my_oe wrote: »

We already receive less than a non working couple, judging by the BMW driving social welfare claimants living in the apartment next door.

http://www.askaboutmoney.com/showthread.php?t=189409

The Central Bank is holding their briefing at 11.30am, so we'll know at lunchtime.

I'm hoping for 10% deposit, 4 x combined salary but what I think we'll get is 15% deposit and 3.5 times combined salary (maybe 4x)

Why do you want more, prices will fall or not go as high if the limits are lower.

It's this financial illiteracy which caused the last bust.

Frank Lee Midere

Zamboni wrote: »

Spot on. Credit union loan for deposits and inter-generational finance.
The state seem very keen to get the over 50's to release money from their savings and investments into the property market.
State savings rates have dropped to almost zero.

Supply increases are needed as well ( and could be easily handled with repossessions) but reducing credit in a housing boom is a good thing, exactly what we didn't do last time.

L1011

spockety wrote: »

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

The problem is that if a future date is given, we end up with *another* rush to try get completion before a given date, just as we've had so many times before...

Frank Lee Midere

If the CB didn't do this this is what would have happened. House prices rise. Banks are "better capitalised". Banks offer more credit. 95% mortgages, and 5x incomes. Supply remains the same as it will take a long time to get building going. Prices rise. Banks offer more credit. 98% and 6x incomes. Panic sets in. Now its not a cash market but the supply is still limited and prices are back to boom levels. Banks offer more credit 100% and 6X incomes. Supply catches up and another bust.

The job of the CB is to control this, something they failed to do last time. ( The ECB isn't going to help).

Recondite49

Houses aren't a financial asset, they're a liability. I think it's easy to confuse the advantages of owning a house outright over having a mortgage -it's not the same thing! Why not rent somewhere affordable while you invest your money and then buy a house at the end of the process?

I am saving up to buy some land, then to build my own home. It won't be fancy but all my own.

desertcircus

on_my_oe wrote: »

We already receive less than a non working couple, judging by the BMW driving social welfare claimants living in the apartment next door.

http://www.askaboutmoney.com/showthread.php?t=189409

The Central Bank is holding their briefing at 11.30am, so we'll know at lunchtime.

I'm hoping for 10% deposit, 4 x combined salary but what I think we'll get is 15% deposit and 3.5 times combined salary (maybe 4x)

Why would you want the opportunity to take on more debt in order to remain in the same position in the marketplace?

Frank Lee Midere

Zamboni wrote: »

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

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

Yes, but increasing credit won't help that. Seriously if only 100 houses are for sale and there are 500 people willing to buy increasing credit will increase the 100 houses. You should be campaigning for more supply not more credit.

Frank Lee Midere

Recondite49 wrote: »

Houses aren't a financial asset, they're a liability. I think it's easy to confuse the advantages of owning a house outright over having a mortgage -it's not the same thing! Why not rent somewhere affordable while you invest your money and then buy a house at the end of the process?

I am saving up to buy some land, then to build my own home. It won't be fancy but all my own.

Where could she rent somewhere affordable?

_Kaiser_

Recondite49 wrote: »

Houses aren't a financial asset, they're a liability. I think it's easy to confuse the advantages of owning a house outright over having a mortgage -it's not the same thing! Why not rent somewhere affordable while you invest your money and then buy a house at the end of the process?

I am saving up to buy some land, then to build my own home. It won't be fancy but all my own.

The problem is that renting somewhere affordable (especially at the moment) is not always in-line with where you need to be for work

Paying €1200+ in rent and (ever increasing and inventive!) bills on an average wage if you have a family doesn't leave much to save.

What's needed is enough supply to force prices lower in the rental sector and a reform of it to address the problems faced by both tenants and landlords, as a well as move to more long term rental arrangements (and not the 1-2 years max as is currently the norm)

But without that, these new measures are only half of the puzzle and will only further increase pressure on renters and those who can't qualify for a mortgage

Zamboni

Frank Lee Midere wrote: »

Yes, but increasing credit won't help that. Seriously if only 100 houses are for sale and there are 500 people willing to buy increasing credit will increase the houses of the 100 people. You should be campaigning for more supply not more credit.

I certainly don't want credit increased.
I still think repossessions is the a key aspect of a wider solution. Damned shame it's not politically palatable.

jmayo

Frank Lee Midere wrote: »

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

I don't know why people think NAMA should do things to stop prices rising.

The thing most people seem to forget is that NAMA needs property price increases in order to go anywhere near breaking even never mind making a profit.
It is sitting on massive property loans with the security being property that often comes nowhere near even the discounted loans they bought.

And because the government, the very organs of state, have so much riding on property (i.e. NAMA, nationalised banks with serious exposure to property related lending) they also need property to increase.

Also politicans want the very vocal groups that include those up to their ar**es in negative equity, professionals having climbed on board the property gravy train, to be happier and not make for a p*ssed off electorate.

In the short term increasing prices back towards peak bubble territory are bad for anyone not already on the famous ladder.

But there are bigger problems in the long run.
It tends to force cost of business upwards through both cost of acquiring premises (remember all those Grafton street rents) and more importantly it forces cost of labour upwards, it forces young people to try and take on unreasonable amounts of long term debt in order to just buy a basic home and it forces people who can't afford to buy into paying a bigger chunk of their net income on rent.

And what will happen is the very people we will need in the future (i.e. the bright ones with drive and ability) will look elsewhere to live and raise their families.

The only positive thing that can be said is that the next time prices drop (I can't see 15-25% annual increases going anywhere else), it won't be the banks that are primarily hit, nor some young people who borrowed too much, but lots of investors and cash rich individuals who thought they were onto a good thing.

Zamboni

jmayo wrote: »

The only positive thing that can be said is that the next time prices drop (I can't see 15-25% annual increases going anywhere else), it won't be the banks that are primarily hit, nor some young people who borrowed too much, but lots of investors and cash rich individuals who thought they were onto a good thing.

It was a sustained effort by the state to transfer private wealth from over 50s to the banks.

It is there for anybody to see.

on_my_oe

Frank Lee Midere wrote: »

Why do you want more, prices will fall or not go as high if the limits are lower.

It's this financial illiteracy which caused the last bust.

Because I'm already sale agreed at 10% deposit with a 3.4 multiple. I would have put down a 20% but I got screwed around on a negative equity property for 7 months - during which time prices went up 16%. I'm now buying a new build, but after being led to believe the price was fully finished, I got landed with a bill for extras.

I could stretch to a 20% deposit still, but I'll have to sell shares (which Murphy's law, have fallen by 16% in the last two months)...

It's not financial illiteracy in my case, it's feeling like I'm being screwed on every level twice over. It hasn't helped that my first landlord didn't pay his mortgage for five years and we got evicted when the property was repossessed, then our next landlord kept upping the rent every couple of months. Apologies for the rant.

If it helps convince you we are not finically illiterate, my mortgage repayments will be 20% less than my rent, and we also save 1.5 times our mortgage repayment every month (and our combined income is less than 2x the average wage). We achieve this because we budget every single cent.

We want to own so we don't have to beg and plead the landlord to repair broken ovens and fridges, so we can insulate properly and install solar energy, so we don't have to worry about a buy to let landlord not paying his mortgage, and so in ten years time we won't have to pay a mortgage or rent, we can save for our retirement. Also the property we are buying is better than the one we are renting.

Annabananna

I think this is very unfair on FTB who has no parents to give them money to make up the difference between 10% and what the required deposit will be.

We are almost at 10% but we now have to go further is soul destroying.

We are in our mid 30s didnt go mad in the boom times had a tiny wedding had two kids are was medical necessary to have them before I turned 30.

We then got hit with me been mad redundant and no pay rises in my husband job along with higher taxes.

Now finally in the last 18 mths we paid off our car loan the husband has got a promotion and i set up an accountacy business and we are saving......

THEN the bloodly bankers slash our dreams all we want to borrow is 150 to 180 as we outside dublin.

We will get there but we are punished for all the people are not paying their mortgages

handlemaster

Perhaps if your struggling with a 10% déposit y ou shouldnt be buying.

StudentDad

Annabananna wrote: »

I think this is very unfair on FTB who has no parents to give them money to make up the difference between 10% and what the required deposit will be.

We are almost at 10% but we now have to go further is soul destroying.

We are in our mid 30s didnt go mad in the boom times had a tiny wedding had two kids are was medical necessary to have them before I turned 30.

We then got hit with me been mad redundant and no pay rises in my husband job along with higher taxes.

Now finally in the last 18 mths we paid off our car loan the husband has got a promotion and i set up an accountacy business and we are saving......

THEN the bloodly bankers slash our dreams all we want to borrow is 150 to 180 as we outside dublin.

We will get there but we are punished for all the people are not paying their mortgages

You are being punished - to use your phrase - because the market was inflated beyond stupid levels and the banks gave cash to people who never had a realistic chance of paying the money back over the long term. If the lending criteria are at last going to be realistic all the better.

SD

Lucy B

So has this been made the new rule so? Starting from when? We nearly have our 10% deposit saved!!!

Annabananna

handlemaster wrote: »

Perhaps if your struggling with a 10% déposit y ou shouldnt be buying.

Hi its not that we are struggling with the 10% we started saving for 18k about 13 months ago we been saving between 800 and 1 k a month since then and we were aiming to be in a position to buy next April/May we are also paying 900 a month rent.

I just annoyed as we seem to be so near but yet so far but yet if someone stops paying their mortgage they dont seem to be any appetite to have them dealt with either though renting them back the house or they leaving that home.

A better banking system will be good news for everyone but there needs to some sort of consideration be taken into account for people who pay their rent every month and have a proved track record this should account for something.

desertcircus

Annabananna wrote: »

Hi its not that we are struggling with the 10% we started saving for 18k about 13 months ago we been saving between 800 and 1 k a month since then and we were aiming to be in a position to buy next April/May we are also paying 900 a month rent.

I just annoyed as we seem to be so near but yet so far but yet if someone stops paying their mortgage they dont seem to be any appetite to have them dealt with either though renting them back the house or they leaving that home.

A better banking system will be good news for everyone but there needs to some sort of consideration be taken into account for people who pay their rent every month and have a proved track record this should account for something.

It does: without it, a person won't get a mortgage.

jester77

Annabananna wrote: »

Hi its not that we are struggling with the 10% we started saving for 18k about 13 months ago we been saving between 800 and 1 k a month since then and we were aiming to be in a position to buy next April/May we are also paying 900 a month rent.

I just annoyed as we seem to be so near but yet so far but yet if someone stops paying their mortgage they dont seem to be any appetite to have them dealt with either though renting them back the house or they leaving that home.

A better banking system will be good news for everyone but there needs to some sort of consideration be taken into account for people who pay their rent every month and have a proved track record this should account for something.

Well, you only started saving 13 months ago, it's a very short period to build up a decent deposit. I bought a house last year, but had been saving for 15 years. Wasn't saving a huge amount each month, but it added up over time. You just need to be patient, keep saving and don't put yourself into hardship either a long the way. Life is for living after all.

Lucy B

Annabanana, we are in the exact same position as you, have been saving hard to get our deposit together, paying rent, having perfect current accounts, all set in the next 6 months to get our mortgage and now this! Totally fed up now.

highgiant1985

Any where I can see details on whats been announced yet?

Balmed Out

Cant help but think that getting a loan of 180k is a bit risky if by your mid 30's a couple has only managed to save 18k?

Annabananna

Lucy B wrote: »

Annabanana, we are in the exact same position as you, have been saving hard to get our deposit together, paying rent, having perfect current accounts, all set in the next 6 months to get our mortgage and now this! Totally fed up now.

Hi Lucy fed up annoyed feeling ****ed over and every other word you can think of.
The reason for this is people not paying their mortgage simple answer then is to throw them out on the streets after they don't pay for a specific time not punish us the renters who are at the mercy of the landlord.
We are the ones at a months notice can get thrown out within the first months of a lease we the ones who have to put up with landlords illegally holding deposits we are the ones who have to beg for the new appliances or the window handle to be fixed.
While all the time paying rent and saving anyone on here that does have a mortgage do you pay it each month and save the exact same amount. A lot of people I know don't but they have the security the banks won't throw them out.
As for rent working for you in getting a mortgage I not sure it does we were told by two banks to try and move home to save more this wasn't a option for us.

Balmed Out

Balmed Out wrote: »

Cant help but think that getting a loan of 180k is a bit risky if by your mid 30's a couple has only managed to save 18k?

They said they only started saving recently. Plenty of people don't save during their 20's as their wages are a bit lower and they are spending money living life. Its no reflection on someones ability to pay back a mortgage.