Central Bank to limit amount banks lend for home purchase

RecordStraight

TrishSimon wrote: »

Calculations on a 230K house we now need € 50,476.00 which nearly makes me laugh its so ridiculous and I know I am never going to be able to save that amount so as someone else said I hope I win the lotto !!

Trish, this is wrong. You'll 'only' need to raise 24k or so. The first 220k of the price only requires a 10% deposit.

The only thing is that perhaps you shouldn't rush into another property purchase that may prove a mistake, as your last one was? Just a thought.

daheff

RecordStraight wrote: »

Minor point: the 'good days' were actually the bad days - .

Good days coz everybody had a job, everybody could get a mortgage and buy a house, go on 4 holidays a year, buy a new car and enjoy themselves :cool:

matt-dublin

RecordStraight wrote: »

Minor point: the 'good days' were actually the bad days - a bubble that ruined hundreds of thousands of people, and bankrupted the country. The last genuinely 'good days' were probably the 90s. Anyway...

anglo irish bank bankrupted the country. With might i add support of the central bank at the time.

matrim

RecordStraight wrote: »

Trish, this is wrong. You'll 'only' need to raise 24k or so. The first 220k of the price only requires a 10% deposit.

The only thing is that perhaps you shouldn't rush into another property purchase that may prove a mistake, as your last one was? Just a thought.

She isn't a FTB so would need 20% deposit

RecordStraight

daheff wrote: »

Good days coz everybody had a job, everybody could get a mortgage and buy a house, go on 4 holidays a year, buy a new car and enjoy themselves :cool:

'Good days' the way it's good fun falling off a cliff. The air rushing past you, the view, the adrenaline...

The mortgages, holidays and credit were all only symptoms of the coming crash.

TrishSimon

RecordStraight wrote: »

Trish, this is wrong. You'll 'only' need to raise 24k or so. The first 220k of the price only requires a 10% deposit.

The only thing is that perhaps you shouldn't rush into another property purchase that may prove a mistake, as your last one was? Just a thought.

Thanks but I am a non FTB so fall into the 20% bracket and so does my husband once we put in a joint application which we need to do to get the amount we want 230K he is no longer classed as a FTB.
My first property wasn't a mistake its actually a really nice apt just does not suit our needs now and we didn't know a pub was given permission by SDCC to open up 6 months after we all moved in so hence alot of noise and terrible quality of life, its gone now so all is changed.
I am a very sensible person and have a great credit history so I know we can manage payments on 230K, I in fact was offered 206K in 2008 by a bank to buy a property and I was only on 29K with a loan but I said no because I could see trouble down the line with not being able to afford that amount on my own and I was right because I lost my job in Oct 2010.

We just have to sit back assess the situation and go from there, I am meeting with a broker in the coming weeks to discuss some things and get advice as where to go from here.

RecordStraight

matt-dublin wrote: »

anglo irish bank bankrupted the country. With might i add support of the central bank at the time.

Anglo cost us 20 billion odd. The other banks another 20 billion or so. We could have shrugged that off. What actually bankrupted us was public expenditure when our tax revenues collapsed.

RoboRat

Kinet1c wrote: »

The new CB regulations are the equivalent of putting "Do not eat" on packs of silica gel because a lot of stupid people need protecting from themselves. Many posts on here (and elsewhere) have proved that Honohan was right.

I don't have an issue with the regulating the way money is loaned, it is very much needed and being honest, it should have been done years ago.

I have an issue with their one size fits all approach to non FTB mortgages that completely forgets about the people who are trapped because they were unfortunate enough to have bought between 03/04 - 08, didn't default, and were hoping to finally get out of a rut. There was no consideration for these people who from reading a lot of posts on here, have struggled to pay their mortgages whilst saving the 10%. As I have said a few times, if these people done what the a lot of the developers done and said screw this, we would be in real sh1tstorm.

I don't think that adding a caveat to the regulations which caters for these people is too much of an ask. They are not risky investments as they have demonstrated the ability and willingness to pay, even through the worst economic downturn in history. Its a bit much to accept that an FTB without a proven track record is a less risky proposition than someone who has proven ability.

Icepick

daheff wrote: »

The most serious consequence of this latest piece of meddling by the CB is that we'll see more and more property owned by investment funds (rather than landlords).

Investment funds will have the cash to buy up chunks of real estate (like they do in other countries). so as long as rents keep increasing, the yield will be higher for them so they will look to invest more. Over time this will mean that the average person will be priced out of the market more & more (at least of the popular places to live)- dont believe me? look at Germany /france/italy etc. People rent more there than here....why? Not because they want to, but because they cant afford to buy in the areas where they want to. As people in Germany/France/Italy are more open to renting to live in areas they want to (better rental laws etc), they are prepared to rent in the areas where they want to live.

..not.
Individual landlords is a terrible legacy of the bubble years.

Jeremyr

the kelt wrote: »

That more or less sums up how im feeling today to be honest.

Things were beginning to look up and now i honestly feel more trapped than ever. Feeling trapped is a horrible feeling.

How


This is a good thing, i have been saving damn near a decade for a house now i have over 100k deposit which should be more than enough i might be able to actually buy a place to call home

matt-dublin

irish-indo wrote:

The revelation that builders ceased all house construction when the proposals were announced in October comes as a shock.

http://www.independent.ie/opinion/columnists/charlie-weston/firsttime-buyers-will-get-a-break-but-new-rules-are-still-restrictive-30943936.html

bet noone spotted that...

the kelt

RoboRat wrote: »

I don't have an issue with the regulating the way money is loaned, it is very much needed and being honest, it should have been done years ago.

I have an issue with their one size fits all approach to non FTB mortgages that completely forgets about the people who are trapped because they were unfortunate enough to have bought between 03/04 - 08, didn't default, and were hoping to finally get out of a rut. There was no consideration for these people who from reading a lot of posts on here, have struggled to pay their mortgages whilst saving the 10%. As I have said a few times, if these people done what the a lot of the developers done and said screw this, we would be in real sh1tstorm.

I don't think that adding a caveat to the regulations which caters for these people is too much of an ask. They are not risky investments as they have demonstrated the ability and willingness to pay, even through the worst economic downturn in history. Its a bit much to accept that an FTB without a proven track record is a less risky proposition than someone who has proven ability.

Thats it in a nutshell.

I dont have an issue with the regulations. There is an ignorant assumption by a lot of people (and i think that Honohan and the government think the same) that all of these people who bought in the boom were all partying trying to advance their portfolio so why should they be helped. That assumption has been proven by many posts on this thread.

There is also another set of people who done nothing wrong, in fact they done the opposite, worked hard, saved money, paid their dues and now they also get punished. No consideration whatsoever for that group of people, not looking for handouts, just looking not to be kicked down each time we look to be turning a corner.

Meanwhile the likes of Sean Quinn pays €20k and everything is ok! Great little country, it seems the more you do the right thing in this country the more you get punished. I heard on a news bulletin today that this generation of people wwas described as an unintended consequence of the new regulations

Well at least we have a term to ourselves, the unintended consequence generation or to put it in laymans terms, the crowd that believe in doing the right thing and paying what they owe so screw away on them!

RoboRat

Jeremyr wrote: »

How


This is a good thing, i have been saving damn near a decade for a house now i have over 100k deposit which should be more than enough i might be able to actually buy a place to call home

Good for you and fair play, but your situation doesn't reflect the scenario that a lot of people are feeling. If I didn't buy in 2006 I could probably buy for cash outright, if I stopped paying my mortgage after the sh1t hit the fan in 2008, I would would be out of insolvency and have around 100k too.

The facts are that a lot of people bought houses in the years preceding the boom when they were at their highest and are still in NE or about parity to what they owe... these new regulations completely screw us over.

RecordStraight

matt-dublin wrote: »

http://www.independent.ie/opinion/columnists/charlie-weston/firsttime-buyers-will-get-a-break-but-new-rules-are-still-restrictive-30943936.html

bet noone spotted that...

The revelation that builders ceased all house construction when the proposals were announced in October comes as a shock.

Charlie Weston has a record of spouting unsubstantiated horse poo. This looks like more of it.

Zubeneschamali

RoboRat wrote: »

I have an issue with their one size fits all approach to non FTB mortgages that completely forgets about the people who are trapped because they were unfortunate enough to have bought between 03/04 - 08, didn't default, and were hoping to finally get out of a rut.

You mean people in negative equity?

From what I read, housing loans for borrowers who are in negative equity and who are obtaining a mortgage for a new property are not subject to the LTV limits

RecordStraight

the kelt wrote: »

There is also another set of people who done nothing wrong, in fact they done the opposite, worked hard, saved money, paid their dues and now they also get punished.

They didn't do anything wrong, but they borrowed big bought an asset at the worst time in living memory. It was a dumb thing to do, and living with it isn't a punishment, it's just life. Teach your friends and family the signs and symptoms of the bubble that caught you out, make the world a better place.

RoboRat

the kelt wrote: »

Thats it in a nutshell.

I dont have an issue with the regulations. There is an ignorant assumption by a lot of people (and i think that Honohan and the government think the same) that all of these people who bought in the boom were all partying trying to advance their portfolio so why should they be helped. That assumption has been proven by many posts on this thread.

There is also another set of people who done nothing wrong, in fact they done the opposite, worked hard, saved money, paid their dues and now they also get punished. No consideration whatsoever for that group of people, not looking for handouts, just looking not to be kicked down each time we look to be turning a corner.

Meanwhile the likes of Sean Quinn pays €20k and everything is ok! Great little country, it seems the more you do the right thing in this country the more you get punished. I heard on a news bulletin today that this generation of people wwas described as an unintended consequence of the new regulations

Well at least we have a term to ourselves, the unintended consequence generation or to put it in laymans terms, the crowd that believe in doing the right thing and paying what they owe so screw away on them!

If my kids grow up and this something like this happens again, my advice would be to stop paying the mortgage, rent the house out and move all your money and assets to a sibling and wait for the bank to repossess but fight them at every instance, declare insolvency and wait it out. Then by the time you are out of insolvency, you have a huge chunk of cash to start afresh.

That is what I have learned and its a shame as I have never played the system and always been honest and forthright in my dealings.

RecordStraight

RoboRat wrote: »

If my kids grow up and this something like this happens again, my advice would be to stop paying the mortgage, rent the house out and move all your money and assets to a sibling and wait for the bank to repossess but fight them at every instance, declare insolvency and wait it out. Then by the time you are out of insolvency, you have a huge chunk of cash to start afresh.

That is what I have learned and its a shame as I have never played the system and always been honest and forthright in my dealings.

Sad but true. It's the chancers and gombeens who have come out of this bust well. I've heard so many tales of landlords not paying their mortgages and pocketing the rent. And then Gerry Beades, Ben Gilroy and other anti-eviction idiots rally around the conman.

molloyjh

gaius c wrote: »

Sorry if this seems cruel but if you can't save that amount on two incomes, you probably can't afford the house either.

This doesn't seem cruel, but it does seem a bit naive. €50k is a hell of a lot of money to try and save while living in Dublin. Especially if you're already paying a mortgage or rent. To put it in perspective 2 people need to save over €400 a month each, every month for 5 years to make up that deposit. That is of course unless they have equity that they can take with them.

This move will only drive house prices down (not a bad thing in the long term obviously) which will reduce or remove the equity those looking to trade up would have in their homes. All of which will make the purchase of property in cities more difficult.

To put this in some perspective, my wife and I are on a combined income of around €100k. Far enough above the national average to be comfortable. We bought in 2003 on the outskirts of the city (and on the completely opposite side of the city from all our family and friends) to ensure that we weren't shooting ourselves in the foot. We're only now looking at coming out of negative equity though despite that. We've been looking to move back closer to home, making sacrifices with regard the size of the home etc to do so. We identified a property to the value of €395k. Under the existing rules the deposit we needed to come up with was just over €30k and the mortgage was going to be around the €360k mark. We were going to struggle somewhat with the deposit but it would have been doable for us due to help from parents. The mortgage was also going to be doable as the location of the house meant an end to my wifes commute down the M50 and through the toll (nevermind the cost of car parking).

Now the deposit for that house is €79k. Where the hell is anyone meant to get that kind of money from, especially off the back of a major recession? Will the house price drop as a result of this? Possibly, but will it drop by much? Probably not. A lot of property owners simply won't be able to afford to drop their prices. Especially when there's such a lucrative rental market out there.

Greg Kavanagh asked the question today (here) regarding the OECD recommendations of 4.5 times income and 10% deposit. That would make far more sense.

Or even, and this is a mad idea altogether, we should scrap the idea of a static wage multiple and have a more suitable solution that looks at all the relevant variables. I mentioned above that a higher mortgage would be affordable for us based on the reduction in travel time. We estimated that we could save around €300 a month on travel by moving (based on petrol, tolls and parking costs). That alone would have a significant impact on mortgage affordability. Yet there is literally no attempt made to account for things like that at all. It's downright lazy is what it is.

RoboRat

From what I read, housing loans for borrowers who are in negative equity and who are obtaining a mortgage for a new property are not subject to the LTV limits

But a lot of us have taken the pain and were hoping to sell when we hit parity, I was anyhow and I had projected this summer as D day.

They didn't do anything wrong, but they borrowed big bought an asset at the worst time in living memory. It was a dumb thing to do, and living with it isn't a punishment, it's just life. Teach your friends and family the signs and symptoms of the bubble that caught you out, make the world a better place.

Hindsight is 20/20. I looked at houses in 2004, one of the houses went back on sale in 2005 for 70k more, by 2006 it was still rising and no discussion of a bust just a 'soft landing'. Yes, I made a mistake, something I have had to live with for 7 years now and it has affected my health enormously. To put it in context, do you turn around and say the smokers who got hooked in the 50's were to blame when the doctors were saying its perfectly safe?

I am not asking for a handout just that our cases are assessed with consideration and that there is some degree of respect shown to us for doing the honourable thing and paying our dues, rather than having sand kicked in our faces.

RecordStraight

RoboRat wrote: »

Hindsight is 20/20. I looked at houses in 2004, one of the houses went back on sale in 2005 for 70k more, by 2006 it was still rising and no discussion of a bust just a 'soft landing'. Yes, I made a mistake, something I have had to live with for 7 years now and it has affected my health enormously. To put it in context, do you turn around and say the smokers who got hooked in the 50's were to blame when the doctors were saying its perfectly safe?

I think it was pretty well known that smoking was associated with coughing and lung disease in the 50s. There were plenty of people warning about the property bubble in 2004, 2005, 2006, 2007. The people you heard arguing that there was no bubble were people with a vested interest in the bubble continuing. You showed a lack of judgement in not realising that. It doesn't make you a bad person, but you have to live with the mistakes you make.

RoboRat wrote: »

I am not asking for a handout just that our cases are assessed with consideration and that there is some degree of respect shown to us for doing the honourable thing and paying our dues, rather than having sand kicked in our faces.

I respect anybody who goes out to work and pays their own way. Paying back what you borrowed is paying your way. But public policy needs to protect us from other people being suckered into a future bubble as you were - if this is inconvenient for you, that is unfortunate, but it might save people like you in the future.

skallywag

RoboRat wrote: »

If my kids grow up and this something like this happens again, my advice would be to stop paying the mortgage, rent the house out and move all your money and assets to a sibling and wait for the bank to repossess but fight them at every instance, declare insolvency and wait it out....

What a great argument for the banks to loan money more easily to people!

RoboRat

I think it was pretty well known that smoking was associated with coughing and lung disease in the 50s.

Really? from the 20's to the 50's doctors campaigned on behalf of big tobacco. Have a read of this. Anyhow, I was illustrating a point, the dates are not important.

There were plenty of people warning about the property bubble in 2004, 2005, 2006, 2007.

Nope, I am a pessimist by nature and always plan for the worst case scenario and there was sweet fcuk all being said about a bust (this is the reason I bought a house for €150k less than what was available to borrow). Anything that was said was contradicted with very persuasive 'facts' - were they vested interests, in hindsight absolutely. I am not an economist anyhow and to say that people had an inkling of what is going to happen is just not true. Its easy to say now that the signs were there, but they weren't visible for ordinary joe's like myself who just wanted a home and were sick of paying rent.

But public policy needs to protect us from other people being suckered into a future bubble as you were - if this is inconvenient for you, that is unfortunate, but it might save people like you in the future.

I agree, I only ask that they take people who bought from 03 - 08 into consideration as a separate entity or amend with a caveat to the current proposition in the same was as the government done when they restructured the TRS rates.

RoboRat

skallywag wrote: »

What a great argument for the banks to loan money more easily to people!

Well the government have shown that this is the best practice so why not? I'm sure they will be back throwing money at the developers in the coming years for little brown envelopes.

PRAF

RoboRat wrote: »

If my kids grow up and this something like this happens again, my advice would be to stop paying the mortgage, rent the house out and move all your money and assets to a sibling and wait for the bank to repossess but fight them at every instance, declare insolvency and wait it out. Then by the time you are out of insolvency, you have a huge chunk of cash to start afresh.

Please don't recommend that! Moving your money and assets to a sibling would likely trigger a Capital Acquisitions Tax liability. Anything over 30k would attract a rate of 33%. Potentially a disastrous move (unless you have lots of siblings to transfer to). Assuming you expect them to transfer it back at some future point, that may also attract CAT tax.

I suspect that deliberately transferring assets to aid an insolvency/bankruptcy application is illegal as well. If the anti-avoidance measures are not already in place, I'm sure they will be soon.

Your credit rating after doing something like this would be toast as well.

Kinet1c

molloyjh wrote: »

Now the deposit for that house is €79k. Where the hell is anyone meant to get that kind of money from, especially off the back of a major recession?

No different to how you put it earlier in your post. Save. Over 5 years it's about 660 each per month that should be saved. It shows you've a track record of saving and easily affordable by a professional couple earning 50k each. They could easily save more and not have to live too frugal a life.

PRAF

Kinet1c wrote: »

No different to how you put it earlier in your post. Save. Over 5 years it's about 660 each per month that should be saved. It shows you've a track record of saving and easily affordable by a professional couple earning 50k each. They could easily save more and not have to live too frugal a life.

All well and good recommending that people simply save more and for longer. However, what if they are now 35 and the bank wont give them a 30 year mortgage in 5 years time. They'll be told they can't afford the repayments over a 25 year term. Also, what if prices increase by 10-15% over that period.

These moves, while I am broadly in favour, have some unintended consequences and are particularly harsh on trader uppers in Dublin in their 30s.

RecordStraight

RoboRat wrote: »

Nope, I am a pessimist by nature and always plan for the worst case scenario and there was sweet fcuk all being said about a bust (this is the reason I bought a house for €150k less than what was available to borrow). Anything that was said was contradicted with very persuasive 'facts' - were they vested interests, in hindsight absolutely. I am not an economist anyhow and to say that people had an inkling of what is going to happen is just not true. Its easy to say now that the signs were there, but they weren't visible for ordinary joe's like myself who just wanted a home and were sick of paying rent.

Ah, there were loads of people pointing out the bubble, David McWilliams only being the most visible and probably the earliest. I was telling anyone who would listen as far back as 2003 that we were entering bubble territory. I should point out that I wasn't an economist either, but had managed to pass economics in the Leaving which gave me a basic understanding of supply and demand.

My basic understanding of supply and demand tells me that restricting credit will lead to reduced property prices, which, in the long term, is good for everyone.

The_Morrigan

RoboRat wrote: »

If my kids grow up and this something like this happens again, my advice would be to stop paying the mortgage, rent the house out and move all your money and assets to a sibling and wait for the bank to repossess but fight them at every instance, declare insolvency and wait it out. Then by the time you are out of insolvency, you have a huge chunk of cash to start afresh.

That is what I have learned and its a shame as I have never played the system and always been honest and forthright in my dealings.

Can we have less of this type of discussion please.

Bob24

daheff wrote: »

The most serious consequence of this latest piece of meddling by the CB is that we'll see more and more property owned by investment funds (rather than landlords).

Investment funds will have the cash to buy up chunks of real estate (like they do in other countries). so as long as rents keep increasing, the yield will be higher for them so they will look to invest more. Over time this will mean that the average person will be priced out of the market more & more (at least of the popular places to live)- dont believe me? look at Germany /france/italy etc. People rent more there than here....why? Not because they want to, but because they cant afford to buy in the areas where they want to. As people in Germany/France/Italy are more open to renting to live in areas they want to (better rental laws etc), they are prepared to rent in the areas where they want to live.

Or ... the government grows some balls, resists lobbying from developers and estate agents , and does something about supply. Then price go down and people can buy with shorter mortgages.

Alternative reality I know, but the CBI is not at fault here. It is just doing what is was blamed for not doing before the previous crisis.

Look at whom was lobbying against that rule and you will know whose interest it was hurting: http://www.irishtimes.com/business/economy/government-and-banks-lobbied-hard-against-80-lending-cap-1.2082567

Also you are pretty wrong at least about France. The situation you described is possibly correct in central Paris, but my brother is in the process of buying an apartment in a nice suburb (posh enough place 25 minutes by public transport from the very center of the city), and affordability is definitely not lower than current Dublin prices for an equivalent area (and since banks don't have to cover risky mortgages with high LTV, the rates he is getting is below 2% fixed for the whole duration, much better deal than what we get here and much safer as his repayments are guaranteed not to go up).