Central Bank to limit amount banks lend for home purchase

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Lucy B wrote: »

I know I'm going to be attacked for saying this, I'm clearly in the minority here, and while I so agree with careful lending, I just hope it is delayed, hope political pressure will help because we will have our deposit saved for at end of March and it's not fair that we are so close and if we need another 10% then I fear it will be years before we can buy. So hard to find houses. So few on market.

So I've my toes and fingers crossed that this doesn't come in for another few months. While I see where ye are all coming from re sensible lending and bubbles, but for some of us, we are so close......

So it's grand to lend recklessly to you but everyone else can take a run and jump? Bit hypocritical no?

P. Breathnach

Lucy B wrote: »

I know I'm going to be attacked for saying this, I'm clearly in the minority here, and while I so agree with careful lending, I just hope it is delayed, hope political pressure will help because we will have our deposit saved for at end of March and it's not fair that we are so close and if we need another 10% then I fear it will be years before we can buy. So hard to find houses. So few on market.

So I've my toes and fingers crossed that this doesn't come in for another few months. While I see where ye are all coming from re sensible lending and bubbles, but for some of us, we are so close......

There are plenty of properties on the market. The challenge you face is that you can't easily find a property you like at a price you like. Perhaps you need to relax your search criteria.

I have been looking for a property for a while, with finance already in place. I think I have a good handle on a particular market segment, an area where prices are on the high side because it is considered "good". I have made some solid offers (some higher than asking price) and been outbid. No complaints: no point in complaining. But I do wonder if some of those who outbid me are people who might be considered reckless borrowers, people who are prepared to bury themselves in a level of debt that might be unsustainable. Should I have competed against such bidders, and become a reckless borrower?

Some of those currently being squeezed out of the market are the prudent purchasers.

Mongfinder General

P. Breathnach wrote: »

There are plenty of properties on the market. The challenge you face is that you can't easily find a property you like at a price you like. Perhaps you need to relax your search criteria.

I have been looking for a property for a while, with finance already in place. I think I have a good handle on a particular market segment, an area where prices are on the high side because it is considered "good". I have made some solid offers (some higher than asking price) and been outbid. No complaints: no point in complaining. But I do wonder if some of those who outbid me are people who might be considered reckless borrowers, people who are prepared to bury themselves in a level of debt that might be unsustainable. Should I have competed against such bidders, and become a reckless borrower?

Some of those currently being squeezed out of the market are the prudent purchasers.

Fantasy Land Purchase - Foxrock

Dream Land Purchase - Cabinteely

Reality Check - Bray

The likes of Bray is where the prudent and careful are headed. Cabinteely and Foxrock is where the bank of Mum and Dad give out mortgages.

gaius c

Mongfinder General wrote: »

Under instruction from whom?

CBoI answer to the ECB basically.

makeorbrake

gaius c wrote: »

CBoI answer to the ECB basically.

I hope that's the case - as they seemed to have a free reign previously and the ECB sat back and didn't act.

It's sad - but everything in this thread testifys to the fact that we have to be protected from ourselves.

gaius c

He's a member of the governing council of the ECB.
https://www.ecb.europa.eu/ecb/orga/decisions/govc/html/index.en.html
They are his bosses.

Lucy B

donkeyoaty0099 wrote: »

So it's grand to lend recklessly to you but everyone else can take a run and jump? Bit hypocritical no?

No, not hypocritical, we are living in the house we want to buy, if we aren't ready to buy in the coming few months then we will have to leave this rented house and it will go on the open market. we live in a small rural village, nice property v hard to come by here. It's just a bitter pill to swallow when we are about 6k away from having our deposit sorted. Imagine missing out by just 6k!!! That's what is getting to me!

Mongfinder General

gaius c wrote: »

CBoI answer to the ECB basically.

Any specific committee in the ECB? Is there a quango in there dictating further policy to augment basel and the CRD?

Mongfinder General

gaius c wrote: »

He's a member of the governing council of the ECB.
https://www.ecb.europa.eu/ecb/orga/decisions/govc/html/index.en.html
They are his bosses.

I know Gaius. Who r_u posted that Honohan is under instruction, plain and simple. It isn't plain and simple to me. I'd like to know from whom the instructions are coming. Surely there are minutes of ECB meetings? Is there another cadre that I don't know about?

gaius c

Good point actually. I imagine that the background to these rules is that the ECB is looking at our apparent wish for self-immolation with horror and is moving to protect us from ourselves (and also anybody lending money to our banks) but I doubt that these things would be publicly available within a short timeframe of them happening.

makeorbrake

Mongfinder General wrote: »

I know Gaius. Who r_u posted that Honohan is under instruction, plain and simple. It isn't plain and simple to me. I'd like to know from whom the instructions are coming. Surely there are minutes of ECB meetings? Is there another cadre that I don't know about?

I agree with you but then this is the ecb that won't participate in our banking enquiry :-(

makeorbrake

Lucy B wrote: »

We live in a small rural village, nice property v hard to come by here. It's just a bitter pill to swallow when we are about 6k away from having our deposit sorted. Imagine missing out by just 6k!!! That's what is getting to me!

That's what's getting to a lot of people in your position. I empathise but the old phrase, the best made plans of mice and men springs to mind. Furthermore, it's not as if your plans have been destroyed forever. You just need to adjust your plans and adapt to a new set of circumstances. It's only pushing those plans down the road a bit.

If that measure had been in place back in '05, it wouldn't have stopped me from buying (as I had 27% saved) but it may have mean't that I would have bought at a more sustainable price (as practically every other purchaser was going the 90-100% finance route and paying more than they could afford). If I hadn't have been competing with all those people for a property, I might have been able to buy in a location that suited me better - at a price that would have been more reasonable (rather than end up with a property that lost 55% of its value!). All of the people in this thread that articulate the very same sense of disappointment as you don't seem to factor in the fact that if you end up with that type of 'disappointment' (rather than the short term disappointment of having to push back the buying process), you live with it for the rest of your lives!

It's not the best approach to become emotionally attached to one particular property. Additionally, this measure *may end up saving you money in the long run. I say *may as I accept that's not a foregone conclusion. However with the ending of the CGT exemption at the very same time, then it looks likely that this will be the case.


Part of the problem here is that the irish as a people look at everything in the sense of short term outcomes and never the long term ramifications.

Sala

Lucy B wrote: »

No, not hypocritical, we are living in the house we want to buy, if we aren't ready to buy in the coming few months then we will have to leave this rented house and it will go on the open market. we live in a small rural village, nice property v hard to come by here. It's just a bitter pill to swallow when we are about 6k away from having our deposit sorted. Imagine missing out by just 6k!!! That's what is getting to me!

You may not miss out. The new rules have wiggle room built in - 15% of loans can be over the 80% You may very well be the type of person who fits within the exception. Keep saving, apply for the mortgage anyway and see how it goes. Obviously no one knows who will be an exception but if you have good stable jobs, good savings, and can put forward a case about you living in this specific house already you may have a shot. Even better if you are borrowing less than the 3.5 times income I'd say.

If you can't get it, you will simply need to keep saving and change your plans. It will be disappointing but it won't be a disaster, you will get there in the end.

blindside88

Lucy B wrote: »

No, not hypocritical, we are living in the house we want to buy, if we aren't ready to buy in the coming few months then we will have to leave this rented house and it will go on the open market. we live in a small rural village, nice property v hard to come by here. It's just a bitter pill to swallow when we are about 6k away from having our deposit sorted. Imagine missing out by just 6k!!! That's what is getting to me!

Are you 6k away from the deposit for a 90% mortgage or a 92%. If it's 90% it might be worth looking at AIB and Haven as they are still giving 92%. Might get you that bit closer

P. Breathnach

Lucy B wrote: »

No, not hypocritical, we are living in the house we want to buy, if we aren't ready to buy in the coming few months then we will have to leave this rented house and it will go on the open market. we live in a small rural village, nice property v hard to come by here. It's just a bitter pill to swallow when we are about 6k away from having our deposit sorted. Imagine missing out by just 6k!!! That's what is getting to me!

It's not always easy to sell properties in small rural villages. It might be worth your while having (I presume further) discussions with the owner.

I wish you success in your efforts.

Lucy B

Thanks p breathnach, appreciate it.
We live in a newish housing estate here and any of the properties that come on the market seem to move. Not much else that is new in the area. Was just trying to give the perspective of somebody "real" that these rules will affect. It's been said here that it would be silly lending to give us our mortgage, but we are a safe bet, doing all what we have been advised to do to get our mortgage, are literally very nearly there with our deposit, and then this new rule and it's soo frustrating!! Our kids are in school here too so we do not want to leave the area. Like I said before, it's an unpopular view here, but I really do hope that it is delayed or mortgage insurance is introduced. But if not, as I said before, if our mortgage broker would recommend it, we will just go ahead and apply still, we could be one of the 15% that don't have to have to 20%. Can't help but be emotionally attached to this house, living here a couple of years too, and have a nice life set up in this village, lovely neighbours etc.

Michael D Not Higgins

Lucy, you've said you'd have the 10% by the end of March, and that you're 6k off. That means you're saving 1.5k/month. How much is your deposit, since you can save at quite a high level?

Others on here have said even someone on 90k would struggle to save 1500/month.

GinaI

Lucy B wrote: »

Thanks p breathnach, appreciate it.
We live in a newish housing estate here and any of the properties that come on the market seem to move. Not much else that is new in the area. Was just trying to give the perspective of somebody "real" that these rules will affect. It's been said here that it would be silly lending to give us our mortgage, but we are a safe bet, doing all what we have been advised to do to get our mortgage, are literally very nearly there with our deposit, and then this new rule and it's soo frustrating!! Our kids are in school here too so we do not want to leave the area. Like I said before, it's an unpopular view here, but I really do hope that it is delayed or mortgage insurance is introduced. But if not, as I said before, if our mortgage broker would recommend it, we will just go ahead and apply still, we could be one of the 15% that don't have to have to 20%. Can't help but be emotionally attached to this house, living here a couple of years too, and have a nice life set up in this village, lovely neighbours etc.

Lucy B, I am in a similar position with unpopular view.

The Spider

Michael D Not Higgins wrote: »

Lucy, you've said you'd have the 10% by the end of March, and that you're 6k off. That means you're saving 1.5k/month. How much is your deposit, since you can save at quite a high level?

Others on here have said even someone on 90k would struggle to save 1500/month.

I said that, but it depends on where you live, if you're in a rural village then you wont have rent of 1200 a month. 1500 can be done but you have to cut back on a lot of stuff for a very long time, years in fact.

Lucy B

It isn't a huge mortgage that we are looking for. We are saving our butts off, and our rent is reasonable which helps. You would be amazed how much you can save when you put your mind to it. Never thought we would become excellent savers, but now that we are in the habit of it, I could never go without saving again. Also have been doing manage all year with my mother, so Xmas didn't upset our saving routine.

Sala

Lucy B wrote: »

It isn't a huge mortgage that we are looking for. We are saving our butts off, and our rent is reasonable which helps. You would be amazed how much you can save when you put your mind to it. Never thought we would become excellent savers, but now that we are in the habit of it, I could never go without saving again. Also have been doing manage all year with my mother, so Xmas didn't upset our saving routine.

If it's not a huge mortgage, i.e. less than the max 3.5 times, then you may be one of the exceptions to the 20% rule as you'd be a safer bet. If I was you I'd continue on saving, apply for a mortgage in March and argue your case then

hurlsey

has the 20% rule come into effect, theres no possible way I could come up with 40k!! it would take me 3 years to come up with that!! and house prices in my area keep going up every month!!

P. Breathnach

hurlsey wrote: »

has the 20% rule come into effect, theres no possible way I could come up with 40k!! it would take me 3 years to come up with that!! and house prices in my area keep going up every month!!

One of the reasons why house prices are rising is that some people are borrowing 85-90% of what they are willing to pay. If the 80% maximum comes in, it should slow things down a bit. The 20% might not be as far away as you fear.

matt-dublin

P. Breathnach wrote: »

One of the reasons why house prices are rising is that some people are borrowing 85-90% of what they are willing to pay. If the 80% maximum comes in, it should slow things down a bit. The 20% might not be as far away as you fear.

It won't matter if the new rules come into play, the house prices aren't going to drop. I don't understand why people cant see this.

There's not enough supply to fit demand and there's a lot of cash rich buyers about who already have 20%.

Prices will stagnate for the next year leaving buyers who have the deposit ready saving for another two to three years.

Hopefully by then there might be more houses on the market which will help pricing but until then there will be no change.

I don't know what will happen house prices next year (I certainly didn't predict what has happened over the past 24 months) but you're only half right about the supply/demand equation IMHO.

Supply is not going anywhere in the next few months, but the demand side is changing. The number of FTBers who want to buy might not change but the number of people who can will be reduced a bit (not massively) by the Central Bank rules.

Also, the ending of the Capital Gains Tax exemption means its less attractive for a lot of investors if they buy after December 31st. A friend who works in a bank - and would come across more investors than I ever would - mentioned this to me in the summer and I thought he was over-stating it but maybe that's behind the alleged slowdown at viewings and fall-off in bidding wars. We'll have to wait a few months to see what is really happening because the CSO figures lag reality.

A few pages back on this thread I posted a quote from the Director of Research at Savills - who, if anything, we might expect to talk up the market. He said the 'mattress money' is largely spent; CGT exemption is stripping out a lot of investors (many of whom were looking for something to do with their cash - the poor sods); and there will be slightly fewer FTBers next year. He also suggested that FTBers are more 'price sensitive' than investors which will cool prices - I don't see why that should be true but that was his view.

Overall demand is likely to be down even if supply is pretty much static.
Whether that all adds up to 10% growth instead of 24% (like we saw in Dublin this year) or leads to an actual decline I have no idea whatsoever!

P. Breathnach

matt-dublin wrote: »

It won't matter if the new rules come into play, the house prices aren't going to drop. I don't understand why people cant see this.

There's not enough supply to fit demand and there's a lot of cash rich buyers about who already have 20%.

Prices will stagnate for the next year leaving buyers who have the deposit ready saving for another two to three years.

Hopefully by then there might be more houses on the market which will help pricing but until then there will be no change.

I didn't suggest that prices were likely to drop, but that the rate at which they have been rising might slow down.

Yes, for most of the market there are enough potential buyers who can manage 20% or more of the price at current levels. If a tranche of people are allowed borrow more than 80% of the price, then all that happens is demand is inflated and prices are driven up further.

There are still situations where property is virtually impossible to sell. We have too many houses or apartments in the wrong places.

allibastor

If you look at the rate of house in what would be considered the entry level house buying bracket it is nearly all snapped up by cash waiting buyers.

Any entry level house is now in the control of a LL who will use this to rent out, effectively removing the bottom level of housing, so people either need to rent longer to afford more, or end up moving out.

The Spider

matt-dublin wrote: »

It won't matter if the new rules come into play, the house prices aren't going to drop. I don't understand why people cant see this.

There's not enough supply to fit demand and there's a lot of cash rich buyers about who already have 20%.

Prices will stagnate for the next year leaving buyers who have the deposit ready saving for another two to three years.

Hopefully by then there might be more houses on the market which will help pricing but until then there will be no change.

I agree but I'd go further and say prices won't stagnate, there is an extreme lack of supply at the moment there is 2,328 available houses (not apartments) in Dublin on daft, Dublin requires 7000 extra houses a year to be built just to meet demand.

I could see that amount of housing being easily bought for the forseeable future. Also if prices drop what happened the last time? People took their houses off the market, they won't sell at a loss, sorry but this is fact.

If they want cash they'll rent out the properties, but because of the lack of supply I really can't see Dublin house prices dropping. The extreme low levels of supply mean that prices will continue to rise in Dublin for the forseeable future, the 20% deposit means that people who were ready to buy and are in their mid thirties may be locked out of ever buying a house in Dublin.

The 20% deposit rules mean that houses in the commuter towns will rise as 10% of a deposit for a house in Dublin may be 20% of the deposit for a house in Louth, anyone who wants to buy a house and is at a certain age will have no choice but to look towards the commuter towns especially if it took 5 years or more to get the 10% together.

This will have a knock on effect on people living in these towns as their ability to save 20% against people on salaries in Dublin will be diminished.

There may be more supply eventually in Dublin, Cherrywood for example but that project is nearly a decade away from completion I would estimate.

If you have roughly 2000 houses and the demand is for 7000 prices realistically can't drop especially if the economy is in recovery. People seem to forget the last crash had masses of unemployment and that drove prices down, the economy is recovering jobs are being created every day.

You can't have a property crash without an economical crash as their both very entwined. Prices won't drop in Dublin without a serious economic event, there's easily the people in good jobs in a city of 1.3 million to absorb 2 and a half thousand houses.


On a side note under any residential property there's 3,450 still less than half of what's required, and we all know how people feel about living in apartments long term.

MayBea

P. Breathnach wrote: »

One of the reasons why house prices are rising is that some people are borrowing 85-90% of what they are willing to pay. If the 80% maximum comes in, it should slow things down a bit. The 20% might not be as far away as you fear.

I am inclined to agree with matt-dublin...there is some possibility of 80% maximum might slow things down, but the effect would probably be minor to moderate (given that we will have the same portion of cash buyers in 2015).

According to The Irish Times (Wed, Aug 13, 2014):
The latest IBF/PwC Mortgage Market profile for the second quarter of the year shows that some 8,228 new mortgages were drawn down in the six months to June 30th. However, according to the Property Price Register, 15,435 properties were actually sold during this period, indicating that 47 per cent of all property purchases were funded without a mortgage.
On top of that (Independant, 27/11/2014 ):
Mr Honohan told an Oireachtas Committee yesterday... that last year 2013, the number of loans of more than 80pc to first-time buyers was 2,800

Therefore we have 15,435 properties sold in 6 months with only approx. 1,400 being sold to FTB with mortgages exceeding 80% LTV.
It would be right to say that around 9% of all purchases were made by the FTB with 85%-90% mortgages.

MarkAnthony

It's possible to overstate the CGT exemption, but I do suspect the number of cash-buyers to drop off significantly next year. There will always be cash buyers but you'd be a bit strange to miss out of an exemption worth 33% of your potential profit.