Central Bank to limit amount banks lend for home purchase

Annabananna

jester77 wrote: »

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.

Hi jester it is only a short time but that's my point I guess there are moving the goal posts from January apparently this is unfair they should of given us till January 2016 so at least people like me would feel we had an opportunity to get in at the 10%.

Balmed Out

Ariyah Muscular Sperm wrote: »

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.

I think being able to show a long term habit of saving would have everything to do with being able to pay back a mortgage. At least it would if it were me handing my money over to somebody.

hmmm

The Journal has a good overview
http://www.thejournal.ie/bubble-buster-banks-are-being-hit-with-tighter-controls-on-high-risk-mortgages-1710290-Oct2014/

With some exceptions, the rules require a 20% deposit (30% in a BTL) and capped at 3.5 times income max. All seem very sensible - if you can't manage that, I don't see how you can manage a mortgage.

DulchieLaois

its a no win situation for all those involved !!!!!!

People will be in arrears again as those who got mortgages in the last year will see the price of their houses dropped.

Those who were saving for 10% have been hit also.

Rent will go high cause of the shortage of people selling due to low prices

This legisalation will be ideal for the short to medium term but will be scrapped soon enough no doubt

Balmed Out

Balmed Out wrote: »

I think being able to show a long term habit of saving would have everything to do with being able to pay back a mortgage. At least it would if it were me handing my money over to somebody.

I would look on paying back a loan of any sort as an absolute necessity but spending money on random stuff rather than saving it is quite easy. So just because you aren't saving for years and years does not mean you wont pay back a mortgage.

A very good example for me personally is I got a car loan rather than use money I had put away as I knew I would find excuses not to save (as I wasn't on great money at the time) but the loan would be first thing out of my account every month.

Also not everyone is in position to save, a lot of people who do postgrads etc are in college up to their late 20's or even early 30's and only when they get a job can they start saving. Isn't savings for the last year that the banks are really interested in anyway?

hmmm

DulchieLaois wrote: »

This legisalation will be ideal for the short to medium term but will be scrapped soon enough no doubt

The Central Bank is independent of politicians.

Annabananna

In the consultation paper published today, the Central Bank explains that banks will be able to grant loans to some borrowers who have’t reached the 20% deposit level to allow for some wiggle room for applicants who are on a sound financial footing.
“Examples could include otherwise very creditworthy borrowers who cannot raise the deposit required but who would be able to afford the loan servicing, or younger borrowers whose income can reasonably be expected to rise in the future,”

Who would this be I wonder...

DulchieLaois

ha ha ha ha ha

you would like to think so

Rubberchikken

if they had stuck to the original lending rules of 20+ years ago, then we wouldn't be in this mess.

it's always about greed. and not just the bankers.

Anyone

DulchieLaois wrote: »

its a no win situation for all those involved !!!!!!

People will be in arrears again as those who got mortgages in the last year will see the price of their houses dropped.

Those who were saving for 10% have been hit also.

Rent will go high cause of the shortage of people selling due to low prices

This legisalation will be ideal for the short to medium term but will be scrapped soon enough no doubt

How does the market value of a property affect a persons ability to repay? Cant see why that will affect arrears.

Also, if as you suggest, prices drop, the 10% deposit people have saved will in fact be worth a bigger % of the value.

circadian

Any idea if this would have an effect on an already approved mortgage? Would I have to be re-evaluated under these new rules or would the approval run for the agreed time?

Zamboni

For your reading pleasure

Macro - prudential policy for residential mortgage lending

http://www.centralbank.ie/regulation/poldocs/consultation-papers/Documents/CP87%20Macro-prudential%20policy%20for%20residential%20mortgage%20lending/Macro-prudential%20policy%20for%20residential%20mortgage%20lending.pdf

circadian

Thanks for that.

I'm curious about what is being done to discourage investment in the property market?

As it stands this measure is simply tilting the scales against the prospective owner-occupier and in favour of the investor.

A sensible housing policy would be as punitive as possible around investment in what is a basic human right (shelter), and have lower house prices as a goal not an accidental outcome every now and then. You'll be waiting a long time for that though.

Shedite27

hmmm wrote: »

...the rules require a 20% deposit .... and capped at 3.5 times income max. All seem very sensible - if you can't manage that, I don't see how you can manage a mortgage.

My own situation....€120k joint income (no children/loans), €70k deposit saved.....Currently renting for €1200/m and saving another €1200/m

By 20% deposit rule I can now only buy for €300k (€1150 p/m repayment) Despite 5 years of effectively paying €1000 more.

Shedite27

Deleted User wrote: »

I'm curious about what is being done to discourage investment in the property market?

As it stands this measure is simply tilting the scales against the prospective owner-occupier and in favour of the investor.

Agreed. This is definitely my reading of it. Perhaps it's a clever/sneaky ploy to boost availability of rental markets?

Zamboni

hmmm wrote: »

The Journal has a good overview
http://www.thejournal.ie/bubble-buster-banks-are-being-hit-with-tighter-controls-on-high-risk-mortgages-1710290-Oct2014/

With some exceptions, the rules require a 20% deposit (30% in a BTL) and capped at 3.5 times income max. All seem very sensible - if you can't manage that, I don't see how you can manage a mortgage.

It is a crock of sh*t when these rules are being applied to the next generation who already have to pay increased interest rates whilst a portion of last crowd stay in their unsustainably mortgaged properties for free after receiving their stamp duty exemptions and gain TRS.

This is the correct policy at the wrong time.




.

_Kaiser_

Zamboni wrote: »

It is a crock of sh*t when these rules are being applied to the next generation who already have to pay increased interest rates whilst a portion of last crowd stay in their unsustainably mortgaged properties for free after receiving their stamp duty exemptions and gain TRS.

This is the correct policy at the wrong time.


.

I also fail to see how those currently renting places where the rates will only increase as a result (more people forced to rent as unable to get a mortgage) are supposed to save 20% as well as pay all their bills.

Not everyone can go home to mammy and daddy, and not everyone is a student who is willing to share a place into their 30s and beyond.

How a young family is meant to pay their current bills AND save is beyond me - especially if only one is working due to childcare costs

None of this would be an issue if we had a properly regulated rental sector and enough supply to force rents down to reasonable levels, but we don't!

Shiraz 4.99

Shedite27 wrote: »

My own situation....€120k joint income (no children/loans), €70k deposit saved.....Currently renting for €1200/m and saving another €1200/m

By 20% deposit rule I can now only buy for €300k (€1150 p/m repayment) Despite 5 years of effectively paying €1000 more.

Are they proposing 3.5x Joint income or 3.5x single applicant ?

Zamboni

Here is an idea to stabilise prices
Increase stamp duty for non FTBers. Dramatically.

seamus

DulchieLaois wrote: »

will be in arrears again as those who got mortgages in the last year will see the price of their houses dropped.

You only go into arrears when you stop paying your mortgage. People who got their mortgages in the last year will presumably continue paying them regardless of what the market does.

Those who were saving for 10% have been hit also.

Rent will go high cause of the shortage of people selling due to low prices

This legisalation will be ideal for the short to medium term but will be scrapped soon enough no doubt

Actually the caps will likely make complete sh1te of the market in the short term, but medium to long-term will make it far more stable and reasonable.

This is a good idea. And I'm one of the people for whom these new rules probably fnck up my plans and mean that I will probably have to find somewhere to rent for the remainder of this decade. Although given that the caps are effectively optional for the banks, that's not a given.

There are a number of things at play at the moment. Prices have been increasing over the last 18 months because of a large influx of cash buyers and practically zero building output. Demand can breed demand, so as prices start to rise, people begin considering buying. Those with mortgages are left chasing those with cash in the race to get a decent property, and prices push up ever further.

What's happening now is that cash buyers are leaving the market. Partially because you can't have an self-feeding bubble with cash buyers - once their cash is spent, it can't be respent to buy more property - and partially because of the incentive scheme which ends in December.

Once the cash buyers have left the market, you're left with a large volume of mortgage buyers bidding against each other on inflated prices. Although demand has dropped slightly, there's still no building output, so there's still enough demand to keep the bubble going. And keep going it will, for as long as the banks will continue tweaking their lending rules and lending rates. The value of mortgages (and by extension properties) then spirals beyond normal growth rates, well beyond any growth in incomes because you no longer need a bigger income to get a bigger mortgage. This is how the last bubble came about.

But if the central bank comes along and puts a cap on top, you effectively cap house prices at the rate of inflation. What people can borrow is directly pegged to what they earn, which in turn means that house prices as a whole are pegged to GDP.

What this means in the short-term is that yes, all of the family homes in leafy Dublin suburbs will be priced out of most peoples' ranges and become occupied solely by two-income solicitor families on 150k+ per year.

But because it's location, location, location, what it will most likely mean is an increase in prices for apartments within 15km of Dublin, and other properties out in the commuter belt, as people on a combined salary of €60k realise that the most they can borrow is €260k, which isn't nearly enough to afford a family home in Rathfarnham, but it will get them an equivalent property in Celbridge, or a large family apartment in Lucan.

Eventually over the medium-to-long term even as building resumes the cap should ensure that it resumes at a reasonable pace since there is no guarantee of a quick turnaround on inflated prices.

hmmm

Shedite27 wrote: »

By 20% deposit rule I can now only buy for €300k (€1150 p/m repayment) Despite 5 years of effectively paying €1000 more.

Interest rates could realistically rise by 4-6% over the course of your mortgage, which wouldn't be long eating into that buffer.

Zamboni

hmmm wrote: »

Interest rates could realistically rise by 4-6% over the course of your mortgage, which wouldn't be long eating into that buffer.

True.
Somebody has to pay for all those people sitting in unsustainably mortgages houses financed on tracker mortgages.
And it won't be the banks.

ixoy

What this means in the short-term is that yes, all of the family homes in leafy Dublin suburbs will be priced out of most peoples' ranges and become occupied solely by two-income solicitor families on 150k+ per year.

The problem is that the other people who buy it are those who already have a house and are either trading up or buying an investment property. It will make it very difficult for any FTB to get in there at any point.
In the near term it will probably spike rents again and mine already want up a huge amount this year, thus reducing further the ability to build up a deposit.

as people on a combined salary of €60k realise that the most they can borrow is €260k, which isn't nearly enough to afford a family home in Rathfarnham,

Won't it only be €210k under the new guidelines(60 x 3.5)?

It seems like this should be done in tandem with some form of control because it has no regulation and could really cause an imbalance.

ixus

DulchieLaois wrote: »

its a no win situation for all those involved !!!!!!

People will be in arrears again as those who got mortgages in the last year will see the price of their houses dropped.

Those who were saving for 10% have been hit also.

Rent will go high cause of the shortage of people selling due to low prices

This legisalation will be ideal for the short to medium term but will be scrapped soon enough no doubt

No. It's ideal for the long term, not short term.

ixus

Ariyah Muscular Sperm wrote: »

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.

Maybe it will teach Irish people to be a bit more prudent with their earnings.

ixus

Ariyah Muscular Sperm wrote: »

A very good example for me personally is I got a car loan rather than use money I had put away as I knew I would find excuses not to save (as I wasn't on great money at the time) but the loan would be first thing out of my account every month.

This makes you financially illiterate and ill-disciplined. Hardly ideal for getting a mortgage.

Do the math on what you overpaid on loan by because of your lack of discipline.

seamus

ixoy wrote: »

The problem is that the other people who buy it are those who already have a house and are either trading up or buying an investment property. It will make it very difficult for any FTB to get in there at any point.

...but that's kind of OK. I wouldn't expect a FTB to be able to leap straight into a big family home 5km from the city.

In the near term it will probably spike rents again and mine already want up a huge amount this year, thus reducing further the ability to build up a deposit.

Indeed, this is going to be a problem, and it'll mean more people renting way outside the city.

Won't it only be €210k under the new guidelines(60 x 3.5)?

Sorry, yes I mean afford - €210k mortgage + ~50k deposit.

ixus

Deleted User wrote: »

I'm curious about what is being done to discourage investment in the property market?

As it stands this measure is simply tilting the scales against the prospective owner-occupier and in favour of the investor.

A sensible housing policy would be as punitive as possible around investment in what is a basic human right (shelter), and have lower house prices as a goal not an accidental outcome every now and then. You'll be waiting a long time for that though.

You do realise the govt has been incentivising investment by removing CGT if you buy and hold for seven years.

ixus

Zamboni wrote: »

It is a crock of sh*t when these rules are being applied to the next generation who already have to pay increased interest rates whilst a portion of last crowd stay in their unsustainably mortgaged properties for free after receiving their stamp duty exemptions and gain TRS.

This is the correct policy at the wrong time.

.

Should they just kick the can down the road for the next property collapse?