Central Bank to limit amount banks lend for home purchase

RecordStraight

MayBea wrote: »

I see, the housing stock was absolutely appalling in these years also. Good luck with your search:)

You aren't wrong. Good luck to you too.

Panda_Turtle

RecordStraight wrote: »

If you want to buy a property, you need to save some money. This is known - or at least it was until the bubble.

However, most people want to spend their money on the latest phone, the Vegas trip, the new car, the boozy weekends, the expensive wedding, etc. etc., and then complain when they aren't handed the property of their dreams when they hit 30. Those clowns are in competition with with sensible couples with 150k in the bank already.

Only clowns if they complain, otherwise they just had a good time!

mrmitty

audi12 wrote: »

Agreed who said they were devasted stupid thing to say

I wouldn't call the posters "stupid".
More than likely, they are young and inexperienced.
What seems devastatingly important in ones twenties will be a source of amusement to them in their forties and onward.

:-)

valor rorghulis

Everyone's focus appears to be on deposits.

New rules to me seem disproportionately unfair on single buyers in terms of only being allowed borrow 3.5 times salary

Basically seems you need to be on 60k to afford a small 2bed in north strand. Bit mental would seem

The multiple for single people should be increased to 4.5 imo

jester77

valor rorghulis wrote: »

Everyone's focus appears to be on deposits.

New rules to me seem disproportionately unfair on single buyers in terms of only being allowed borrow 3.5 times salary

Basically seems you need to be on 60k to afford a small 2bed in north strand. Bit mental would seem

The multiple for single people should be increased to 4.5 imo

Then maybe north stand is not the place for them. A single person requires a fraction of the space a couple require. A couple are usually buying with children in mind, thus requiring more finance.

RecordStraight

valor rorghulis wrote: »

Everyone's focus appears to be on deposits.

New rules to me seem disproportionately unfair on single buyers in terms of only being allowed borrow 3.5 times salary

Basically seems you need to be on 60k to afford a small 2bed in north strand. Bit mental would seem

The multiple for single people should be increased to 4.5 imo

Why? Single people are even more risky - 100% reliant on one job.

audi12

RecordStraight wrote: »

Why? Single people are even more risky - 100% reliant on one job.

Maybe single and couples should stop relying on a job to pay the mortgage as if they cant lose that job learn something from history maybe is that beyond some people it seems so

Flem31

RecordStraight wrote: »

Why? Single people are even more risky - 100% reliant on one job.

So are couples with one partner at home looking after the children

Greyian

Flem31 wrote: »

So are couples with one partner at home looking after the children

Who likely wouldn't qualify for a terribly big mortgage then, because they only have 1 salary coming into the household, just like a single person...

RecordStraight

Flem31 wrote: »

So are couples with one partner at home looking after the children

Yup. And they get a 3.5 multiple too, not 4.5 or whatever was suggested.

Electric Sheep

Greyian wrote: »

Who likely wouldn't qualify for a terribly big mortgage then, because they only have 1 salary coming into the household, just like a single person...

and their expenses are much higher.

Brussels Sprout

This legislation combined with the property database from a few years back are both very welcome. Hopefully next up will be the rental market. An independent body for holding deposits like in the UK is sorely required for a start.

Greyian

Electric Sheep wrote: »

and their expenses are much higher.

And if banks feel that they can't meet 3.5* LTI payments, then they will only offer them a lower mortgage. Just because it is at 3.5*LTI doesn't mean everyone has to take/will be offered a 3.5*LTI mortgage.

goz83

I don't see the deposit as the main issue here, but I agree it will slow things down for people considerably. The main problem is the 3.5 multiple. Anyone wanting to buy in a half decent area in Dublin will almost certainly be priced out of the market.

My own house is not far off the record high price and has just this month come out of NE valued at circa 340k. My wife is a teacher and i'm a self employed therapist. In order to qualify for that price bracket, a deposit of around 40k would be needed (for first time buyers) and the couple, or single person would need to be earning about 90k per annum. That's for a 3 bed semi with barely enough room to swing a cat.

I wonder how this could impact the birth rate negatively and the future of our economy. If people are trying to get a career which pays well, so they can afford something decent to buy, they are less likely to think about starting a family. Just a thought.

If house prices fall, then it's mostly a good thing, even if my home return to NE. The CB and Government seem incapable of getting it right though.

CarpeDiem85

Do the new rules take into consideration if you work in the public sector?

Electric Sheep

Greyian wrote: »

And if banks feel that they can't meet 3.5* LTI payments, then they will only offer them a lower mortgage. Just because it is at 3.5*LTI doesn't mean everyone has to take/will be offered a 3.5*LTI mortgage.

That is as it should be. Ability to repay is being much more closely scrutinized.

At least in the 80s families who could not afford to buy a house had a very good chance of getting a council house.

audi12

goz83 wrote: »

I don't see the deposit as the main issue here, but I agree it will slow things down for people considerably. The main problem is the 3.5 multiple. Anyone wanting to buy in a half decent area in Dublin will almost certainly be priced out of the market.

My own house is not far off the record high price and has just this month come out of NE valued at circa 340k. My wife is a teacher and i'm a self employed therapist. In order to qualify for that price bracket, a deposit of around 40k would be needed (for first time buyers) and the couple, or single person would need to be earning about 90k per annum. That's for a 3 bed semi with barely enough room to swing a cat.

I wonder how this could impact the birth rate negatively and the future of our economy. If people are trying to get a career which pays well, so they can afford something decent to buy, they are less likely to think about starting a family. Just a thought.

If house prices fall, then it's mostly a good thing, even if my home return to NE. The CB and Government seem incapable of getting it right though.

Exactly the point why this is good 340 for a small house in a estate madness i don't care where it is

Tobyglen

Single people harshly dealt with.

Can't see why couple with kid/s have twice repayment capacity than single person. Both 3 1/2 times counted.

P. Breathnach

goz83 wrote: »

... Anyone wanting to buy in a half decent area in Dublin will almost certainly be priced out of the market....

The issue is that some prospective purchasers should be priced out of the market, but want to stay in and compete for properties on the basis of taking out huge loans that they might then not be able to service.

There is also a potential for unfairness to the prudent purchaser, who might be driven out of the market by reckless borrowers.

I have walked away from a number of properties when I thought the bidding had gone too high, even though I could have comfortably funded higher bids. It is possible that some of those who outbid me have taken on a debt burden that is very difficult for them (I don't actually know that: I'm supposing). I see myself as a prudent purchaser who might have lost out to people who are less prudent.

PRAF

RecordStraight wrote: »

If you want to buy a property, you need to save some money. This is known - or at least it was until the bubble.

Imagine a person earning 2500 per month after tax - not far off the average industrial wage. There's no reason why this person could not save 800-1000 per month if they are not going for expensive holidays or spending a couple of hundred euros on booze every weekend.

Hardly anyone has bought since 2007 - 8 years ago now. 8*12*800 = 76,800. This does not include any interest on savings. A couple who saved like this since 2007 will have over 150,000 plus interest in the bank.

However, most people want to spend their money on the latest phone, the Vegas trip, the new car, the boozy weekends, the expensive wedding, etc. etc., and then complain when they aren't handed the property of their dreams when they hit 30. Those clowns are in competition with with sensible couples with 150k in the bank already.

Hmmm, not convinced about this. Saving 40% of disposal income on a continuous basis for 8 years is a bit extreme for most people. Especially when you also have to pay rent, utilities, car/public transport, etc. Not to mention if you have kids.

If this kind of behaviour was repeated across the economy, it would be potentially disastrous. Nobody eating out, nobody taking a taxi, no smartphones, nobody leaves the island on their holidays, etc. I'm all for financial discipline, but this sounds like self-imposed misery.

10-15% deposits for FTBs is probably ok IMO. These buyers are young (usually), their income will grow, and over time they'll build up equity to help finance the larger deposit they need when they trade up.

Unfortunately, for lots of trader uppers, they are stuck in properties that are too small, trapped with little or even negative equity, and simply don't have the time or headroom to save up 20%. A political solution will need to be found for these people, the vast majority of whom are simply victims of circumstances.

audi12

PRAF wrote: »

Hmmm, not convinced about this. Saving 40% of disposal income on a continuous basis for 8 years is a bit extreme for most people. Especially when you also have to pay rent, utilities, car/public transport, etc. Not to mention if you have kids.

If this kind of behaviour was repeated across the economy, it would be potentially disastrous. Nobody eating out, nobody taking a taxi, no smartphones, nobody leaves the island on their holidays, etc. I'm all for financial discipline, but this sounds like self-imposed misery.

10-15% deposits for FTBs is probably ok IMO. These buyers are young (usually), their income will grow, and over time they'll build up equity to help finance the larger deposit they need when they trade up.

Unfortunately, for lots of trader uppers, they are stuck in properties that are too small, trapped with little or even negative equity, and simply don't have the time or headroom to save up 20%. A political solution will need to be found for these people, the vast majority of whom are simply victims of circumstances.

How are they victims they bought at the wrong time we are meant to live in a capitalistic society

markpb

mrmitty wrote: »

I want to address this post because it seems that a lot of folks posting on this topic seem "devastated" and I can assure you that in the grand scheme of happenings in life that this will not be a remarkable event.

As someone who has been house hunting for a few months now, let me explain why people might be unduly upset. We've been renting for several years now and in each place we've rented, the landlord has (legally) terminated the tenancy at the end of a lease period because they wanted to sell (now that their property is out of negative equity) or move back in (for personal reasons). This means that each time, we've had the upheaval of house-hunting and then moving all our contents and a small child. There is no security of tenure right now beyond the end of a one year lease.

That's annoying right now but in a year or two when our child reaches school-going age, it'll be even worse because we won't be able to guarantee that we'll be able to live in the same area throughout her primary school years. If rents continue to rise, she'll be commuting to school because we may not be able to continue living in the same area.

Additionally each time we've had to move, our rent has risen by 100-200 per month so our ability to save a deposit has gone down. We both have good jobs so we're able to save and were doing quite well but now, unless property prices fall significantly, we've an uphill struggle to save another 10%.

And that's before a second or third child might be planned or if one of us stays at home through illness or to cut down on the creche fees.

The reason people are upset is because it removes the ability to plan their lives. I don't know where we'll be able to afford to live in 9 months time. I don't know where my child will go to school. If we want a second child, I don't know if we can afford to save for a house deposit.

It's easy to be flippant and say people will survive but those things put a lot of pressure on a couple. Maybe having no way of planning is unremarkable for you but for a lot of people it isn't.

markpb

jester77 wrote: »

Then maybe north stand is not the place for them. A single person requires a fraction of the space a couple require. A couple are usually buying with children in mind, thus requiring more finance.

Are you suggesting that some people should buy starter homes just to get on the property ladder? How very quaint

PRAF

audi12 wrote: »

How are they victims they bought at the wrong time we are meant to live in a capitalistic society

Yes we have capitalism but Ireland is not an unfettered capitalistic society. Ours is a mixed economy where the govt had a moderate to large level of influence in the economy and where markets are regulated to curb market excesses.

Not everyone is an expert in economics, financial services and the property market. Lots of ordinary joes got badly burned in our property market collapse. Our govt as a whole failed in their duty of care to manage the economy, those politicians and civil servants responsible for banking and housing policy failed too, the regulator was abysmal, boards of directors in banks were reckless, the EU failed to supervise, media were derelict in their duties, developers were greedy and stupid, etc, etc. I could go on an on blaming so-called experts who failed spectacularly in the performance of their day to day jobs.

Were lots of people silly in taking out large loans? Undoubtedly. Did they fail to understand the risks they were taking? Probably. Are they blameless? No. However, I do think they were victims of circumstances. The same types of people took the same decisions for years and years and didn't suffer the same consequences.

I don't think it makes sense to throw them to the wolves. From a purely pragmatic perspective, if the govt does nothing, there will be a ticking timebomb in 30 years time when these people retire and find that they do not have sufficient incomes to afford to rent anyway.

goz83

P. Breathnach wrote: »

The issue is that some prospective purchasers should be priced out of the market, but want to stay in and compete for properties on the basis of taking out huge loans that they might then not be able to service.

There is also a potential for unfairness to the prudent purchaser, who might be driven out of the market by reckless borrowers.

I have walked away from a number of properties when I thought the bidding had gone too high, even though I could have comfortably funded higher bids. It is possible that some of those who outbid me have taken on a debt burden that is very difficult for them (I don't actually know that: I'm supposing). I see myself as a prudent purchaser who might have lost out to people who are less prudent.

Nobody should be priced out of a market for the sake of inflating the property market, which is what is happening. If the property market were properly balanced, prices would be almost half of what they are now. The 2012 prices, were for the most part, spot on.

By all means, be prudent.....but keep in mind that your own circumstances are not the only ones in existence. I may be wrong, but the impression I get is that you are a single professional looking for a property at a price you see as reasonable. That's fair enough, but throw into the mix a couple of kids and rent increases and maybe you don't want to be tied into another year of renting, possibly in a new location, because the landlord is selling the property you are living in. These things are happening to people all over the country and where prudence is required in the purchase of a property, they might not all have the luxury of laying in a hammock, sipping a cocktail, while waiting patiently for the right property, at the right price.

audi12 wrote: »

How are they victims they bought at the wrong time we are meant to live in a capitalistic society

What a load of tosh. The poster above already answered this though.

However, If we lived in a truly capitalist society, the bond holders would have been given the middle finger, the banks would have been left to sink, or swim and the tax payer would not be footing the bills of foreign investors.

mrmitty

markpb wrote: »

As someone who has been house hunting for a few months now, let me explain why people might be unduly upset. We've been renting for several years now and in each place we've rented, the landlord has (legally) terminated the tenancy at the end of a lease period because they wanted to sell (now that their property is out of negative equity) or move back in (for personal reasons). This means that each time, we've had the upheaval of house-hunting and then moving all our contents and a small child. There is no security of tenure right now beyond the end of a one year lease.

That's annoying right now but in a year or two when our child reaches school-going age, it'll be even worse because we won't be able to guarantee that we'll be able to live in the same area throughout her primary school years. If rents continue to rise, she'll be commuting to school because we may not be able to continue living in the same area.

Additionally each time we've had to move, our rent has risen by 100-200 per month so our ability to save a deposit has gone down. We both have good jobs so we're able to save and were doing quite well but now, unless property prices fall significantly, we've an uphill struggle to save another 10%.

And that's before a second or third child might be planned or if one of us stays at home through illness or to cut down on the creche fees.

The reason people are upset is because it removes the ability to plan their lives. I don't know where we'll be able to afford to live in 9 months time. I don't know where my child will go to school. If we want a second child, I don't know if we can afford to save for a house deposit.

There's a humongous difference between being "upset" or "annoyed" and being "devastated" as the other poster purports to be.

It's easy to be flippant and say people will survive but those things put a lot of pressure on a couple. Maybe having no way of planning is unremarkable for you but for a lot of people it isn't.

I wasn't being "flippant" , I am offering an anecdote.

P. Breathnach

goz83 wrote: »

Nobody should be priced out of a market for the sake of inflating the property market, which is what is happening.

What causes a market to inflate is an excess of demand over supply where both demand and supply are inelastic in the short term. It's very difficult for government or other non-participants in the market to increase supply in the short term, but relatively easy to manage demand where the demand depends on borrowing from the banking system. And that is where we are at: managing demand by controlling bank lending. That should reduce inflationary pressure, and might even deflate the market a little.

If the property market were properly balanced, prices would be almost half of what they are now. The 2012 prices, were for the most part, spot on.

That depends on what market segment you have in mind. I'll stay out of that quagmire.

By all means, be prudent.....but keep in mind that your own circumstances are not the only ones in existence. I may be wrong, but the impression I get is that you are a single professional looking for a property at a price you see as reasonable. That's fair enough, but throw into the mix a couple of kids and rent increases and maybe you don't want to be tied into another year of renting, possibly in a new location, because the landlord is selling the property you are living in. These things are happening to people all over the country and where prudence is required in the purchase of a property, they might not all have the luxury of laying in a hammock, sipping a cocktail, while waiting patiently for the right property, at the right price.

I don't recognise myself in the picture you paint! But you are right in one thing: I am not under pressure. And yes, I do recognise that other people are in more challenging situations. But how can you allocate 100 houses in, say, Dublin 6 between 150 purchasers? Whatever way you approach it, you will end up with 50 disappointed bidders. And you might end up with prices having been bid up wildly, enabled by easy credit. That's the sort of thing that has been happening. Because, however much money is made available to purchasers, the short-term supply is inelastic: the market will not conjure up 50 more houses in Dublin 6.

I'm not hard-hearted. I'm simply trying to look at the economic realities. That causes me to worry about the danger of another bubble and a consequent crash. I don't want you to end up with an overpriced house, with a loan that is difficult or impossible for you to service, and in negative equity. I'm more concerned for you than I am for me, because my life circumstances make me less vulnerable: I own a half-interest in the roof over my head, and Herself seems okay with our arrangement.

jester77

markpb wrote: »

Are you suggesting that some people should buy starter homes just to get on the property ladder? How very quaint

Please quote where I suggested that??

The_Conductor

audi12 wrote: »

Surely less buyers now then before for a while at least

Not necessarily- more people acquired mortgage approval in the last 6 weeks of 2014, than in the previous 6 months combined. Presumably a large proportion of these will try to use these approval's in principle quick before they expire. There could well be temporary spike- before things calm down to 'normal' levels.

If a typical approval or approval in principle- has a 6 month lifespan- you'd have to wait at least until Q3 of this year- to see things begin to migrate towards their new points of equilibrium..........

I see questions have already been asked in the Dáil about how the proposed regulations will cater towards those caught in inappropriate properties- and lambasting the lack of imagination (there are more people living in accommodation that Local Authority rules would define as unsuitable for them- than there are potential First Time Buyers). Not only are these properties, that would normally feature in the market, excluded from considerations for first time buyers- but you have large cohorts of people bringing up children in inappropriate settings etc- that has not been considered by the Central bank regulations.

If we are to afford a measure of comfort for first time buyers- why not something similar for those currently living in inappropriate accommodation- where they can show they would fail the suitability rules for their local authority housing- were they offered a similar property on their schemes?

Kinet1c

CarpeDiem85 wrote: »

Do the new rules take into consideration if you work in the public sector?

Why would they? What exactly should they be taking into consideration?