Central bank purposes new mortgage protection rules

Frank Lee Midere

realweirdo wrote: »

Why is there a bubble Frank? Lack of supply.

Yeah. Who is denying that. Throwing credit at a lack of supply isn't going to fix it. Supply is easy to fix. We could do it within a year.

KomradeBishop

The relevant part of your post:

Specialun wrote: »

...
Dublin prices are gone up by over 20% ...

So yes, a bubble. Limited to Dublin perhaps, but it is a bubble.

Specialun

Frank Lee Midere wrote: »

Ok there is a bubble in Dublin.

And why is that? What must one instance have a major affect on the other regions?

realweirdo

Frank Lee Midere wrote: »

Irelands Gombeen class were all over prime time defending 500k shoeboxes in the boom.

Wtf? Everyone was complaining about 500k "shoeboxes" in the boom.

Specialun

KomradeBishop wrote: »

The relevant part of your post:

So yes, a bubble. Limited to Dublin perhaps, but it is a bubble.

Yes it is a bubble. WE ,yes WE are not in a bubble.

Dublin is the bubble. No WE

realweirdo

Frank Lee Midere wrote: »

Yeah. Who is denying that. Throwing credit at a lack of supply isn't going to fix it. Supply is easy to fix. We could do it within a year.

Ah Frank, give yourself up. You had me going there for a while but when you post ridiculous stuff like this, I have to ask are you serious.

And what you are asking for is the biggest boom of them all!

It takes years to get planning permission, water, sewerage, infrastructure, building, etc etc.

KomradeBishop

realweirdo wrote: »

Frank, you are not understanding a simple concept, so should I even bother continuing this discussion with you?

One more time...This move will collapse demand...correct? And collapsed demand equals...that's right little or no demand.

So Frank, why would anyone bother providing supply if there is no demand?

You see now?

This is very poor reasoning. If there is a restriction of supply in Dublin, as there is now, then a drop in demand doesn't mean no demand - people don't just stop wanting houses.

Show me any credible source, claiming that will happen in light of this.

realweirdo

As for there being a bubble, there isn't a supply bubble. There is a price bubble. Increase demand is the fix. But these measures will reduce demand.

Frank Lee Midere

realweirdo wrote: »

Wtf? Everyone was complaining about 500k "shoeboxes" in the boom.

Lol. You need to possibly look back at the prime times from that era.

KomradeBishop

realweirdo wrote: »

As for there being a bubble, there isn't a supply bubble. There is a price bubble. Increase demand is the fix. But these measures will reduce demand.

Understanding of Supply and Demand fail.

Frank Lee Midere

realweirdo wrote: »

As for there being a bubble, there isn't a supply bubble. There is a price bubble. Increase demand is the fix. But these measures will reduce demand.

Jesus f*cking wept.

realweirdo

KomradeBishop wrote: »

Understanding of Supply and Demand fail.

Komrade, I understand economics better than you ever will.

You didn't even understand the notion of a supply bubble!

realweirdo

Frank Lee Midere wrote: »

Jesus f*cking wept.

Frank, most of your posts aren't even an attempt at serious discussion so I've nothing more to say to you. Come back to me when you actually understand property bubbles.

Frank Lee Midere

realweirdo wrote: »

Frank, you are not understanding a simple concept, so should I even bother continuing this discussion with you?

One more time...This move will collapse demand...correct? And collapsed demand equals...that's right little or no demand.

So Frank, why would anyone bother providing supply if there is no demand?

You see now?

It will reduce demand at a certain price level. Obviously if houses were 150k a 15% mortgage isn't a big deal.

Supply is a matter of carrot and stick. We could massively increase supply tomorrow by calling in the arrears. We could force developers to build in unused land.

You've fully bought into the developer narrative that they wouldn't get out of bed for less than a 300k house. If so houses will never be less than 300k.

What you need is more housing and cheaper housing not more housing which is more expensive because of uncontrolled credit.

KomradeBishop

realweirdo wrote: »

Komrade, I understand economics better than you ever will.

You didn't even understand the notion of a supply bubble!

Perhaps because the notion is in your head, and not an actual economic term?

Frank Lee Midere

realweirdo wrote: »

Frank, most of your posts aren't even an attempt at serious discussion so I've nothing more to say to you. Come back to me when you actually understand property bubbles.

Real I think most people reading your last post would find your understanding of supply and demand limited not mine.

realweirdo

Everyone agrees there needs to be more new houses built around Dublin, although not so much in the rest of the country.

But you can't build anything without demand.

It's a simple economic concept which even Frank struggles with.

But I don't see how todays proposed measures are going to increase demand.

The reason for the rising house prices is a shortage of new houses around Dublin, most sensible people would agree with that.

Specialun

Frank Lee Midere wrote: »

It will reduce demand at a certain price level. Obviously if houses were 150k a 15% mortgage isn't a big deal.

Supply is a matter of carrot and stick. We could massively increase supply tomorrow by calling in the arrears. We could force developers to build in unused land.

You've fully bought into the developer narrative that they wouldn't get out of bed for less than a 300k house. If so houses will never be less than 300k.

What you need is more housing and cheaper housing not more housing which is more expensive because of uncontrolled credit.

A very large % of the huge increases in regions ofdublin are been driven by the lack of houses. These area' s whether they are near schools or large area's of employment are giving a. False overall number.

mileycactus

Anybody know is the restriction applied to loan offers or drawing down the mortgage?

My situation: mortgage approval/loan offer running out and in process or re-submitting as house build was delayed. Prob be ready in December/jan but Once we have a loan offer for 6 months should be fine

Right/wrong?

My take:: it's incorrect focusing on people only have to save 10% right now... Where does the stamp duty, solicitor fees and furnishing the house come from? That's easily another 5-10% so families are already saving 20ish%..

KomradeBishop

realweirdo wrote: »

Everyone agrees there needs to be more new houses built around Dublin, although not so much in the rest of the country.

But you can't build anything without demand.

It's a simple economic concept which even Frank struggles with.

But I don't see how todays proposed measures are going to increase demand.

The reason for the rising house prices is a shortage of new houses around Dublin, most sensible people would agree with that.

There's no evidence demand will drop to zero - extremely unlikely - so there will be demand.

If anything, house prices dropping will make banks more likely to actually lend to both buyers and developers (those who can afford it), because the loans on both sides will be more sustainable - so this can help stabilize the property market.

realweirdo

KomradeBishop wrote: »

There's no evidence demand will drop to zero - extremely unlikely - so there will be demand.

If anything, house prices dropping will make banks more likely to actually lend to both buyers and developers (those who can afford it), because the loans on both sides will be more sustainable - so this can help stabilize the property market.

It's a total myth to think paying a huge deposit makes a mortgage more sustainable.

Half the lawyers, doctors and other elite professionals in the country are struggling with their property portfolios at present. The new rules will encourage cashrich buy to let investors back into the market. In other words the CB are creating a new cycle of arrears.

Banning buy to let mortgages for a period of 5 years would be a better measure as traditionally these are the riskiest of mortgages and account for a large proportion of arrears at the moment.

matt-dublin

realweirdo wrote: »

It's a total myth to think paying a huge deposit makes a mortgage more sustainable.

Half the lawyers, doctors and other elite professionals in the country are struggling with their property portfolios at present. The new rules will encourage cashrich buy to let investors back into the market. In other words the CB are creating a new new cycle of arrears.

Banning buy to let mortgages for a period of 5 years would be a better measure as traditionally these are the riskiest of mortgages and account for a large proportion of arrears at the moment.

Also the central bank have said the income restrictions won't apply to buy to let mortgages.

Nice big rent rates coming next year I think

realweirdo

mileycactus wrote: »

Anybody know is the restriction applied to loan offers or drawing down the mortgage?

My situation: mortgage approval/loan offer running out and in process or re-submitting as house build was delayed. Prob be ready in December/jan but Once we have a loan offer for 6 months should be fine

Right/wrong?

My take:: it's incorrect focusing on people only have to save 10% right now... Where does the stamp duty, solicitor fees and furnishing the house come from? That's easily another 5-10% so families are already saving 20ish%..

You probably should ask your bank about this and/or mortgage advisor. I think you should be ok for the current setup though.

Son Of A Vidic

Specialun wrote: »

Central bank purposes new mortgage protection rules

Which are nine years too late.

flas

small investor wrote: »

20% deposit is a fortune, average grad salary after 3 yrs maybe 30K ? with couple 60k by 3.5 = 210k where in dublin wud u find house for 210? and ud have to have deposit of 42k I think it should be 10% deposit and 5 times salary. So couple with 60k salary can buy house for 300k. Am I wrong, or will just really rich folks buy houses from now on?

You do realise that over time this will bring the over all price of houses down?

matt-dublin

flas wrote: »

You do realise that over time this will bring the over all price of houses down?

Not if buy to let investors aren't overly affected

realweirdo

matt-dublin wrote: »

Also the central bank have said the income restrictions won't apply to buy to let mortgages.

Nice big rent rates coming next year I think

If the CB don't address buy to let seriously they will fail to deal with arrears.

http://www.debt-settlement-arrangements.ie/mortgagearrears.php

A quarter of buy to let investments are in arrears. There will always be cash rich buy to letters, even more so now they see the market will pick up massively. And they will be competing against ordinary FTBs thus ensuring high prices.

Specialun

flas wrote: »

You do realise that over time this will bring the over all price of houses down?

And if theydont drop what then

All this is based onthe assumption that the prices fall

KomradeBishop

realweirdo wrote: »

It's a total myth to think paying a huge deposit makes a mortgage more sustainable.

Half the lawyers, doctors and other elite professionals in the country are struggling with their property portfolios at present. The new rules will encourage cashrich buy to let investors back into the market. In other words the CB are creating a new cycle of arrears.

Banning buy to let mortgages for a period of 5 years would be a better measure as traditionally these are the riskiest of mortgages and account for a large proportion of arrears at the moment.

It's obvious: If someone has trouble saving up for a deposit, how are they going to keep up with a mortgage?

Cookie_Monster

baldbear wrote: »

I wonder will the goverenment reduce the crazy 41% dirt rate. Its so hard for 1st time buyers to save when savings are hit so hard.

you're savings are not impacted in the slightest, just the income you receive on them.

Specialun

KomradeBishop wrote: »

It's obvious: If someone has trouble saving up for a deposit, how are they going to keep up with a mortgage?

Some are paying rent and saving, insome cases rent is more than what the mortgagewould be

realweirdo

KomradeBishop wrote: »

It's obvious: If someone has trouble saving up for a deposit, how are they going to keep up with a mortgage?

Hmm let me see...a large cash gift from a rich relative to help with the deposit. A good job where you earn lots only to lose your well paying job a few years later.
Some people might find it easy to raise a deposit, but after that, they will face the same problems as everyone else.
In a cashrich business people are able to raise cash quickly, but usually struggle in a downturn. These are probably just the type of people to avoid giving mortgages to, boom and bust merchants, as opposed to your regular long term employed in solid professions such as civil servants who will now largely be shut out of getting mortgages.

_Kaiser_

KomradeBishop wrote: »

It's obvious: If someone has trouble saving up for a deposit, how are they going to keep up with a mortgage?

Because they're trying to save for a mortgage while simultaneously paying increasing rent? Rent which is probably a fair bit more than the mortgage repayment.

Not everyone is a kid with no bills or dependents either, and most of them can't live rent-free at home with mammy and daddy while they get their deposit together. A good portion of them won't have any cash gifts from parents or relatives to fall back on either

Being able to save a deposit != sustaining a mortgage

KomradeBishop

Specialun wrote: »

Some are paying rent and saving, insome cases rent is more than what the mortgagewould be

Sure, rent is too high, but that's a separate problem.

matt-dublin

KomradeBishop wrote: »

It's obvious: If someone has trouble saving up for a deposit, how are they going to keep up with a mortgage?

Saving isn't the problem, the problem is borrowing term is finite. The people who already have their 2
10% now will need to save for another year or two to achieve their deposits.

Housing prices won't drop, maybe executive sales but negative equity properties will come off the market and trader uppers will end up staying where they are which reduced availability.

This opens up the market to investors who likely have cash anyway and gave no borrowing limitations once they can provide 30% up front.

_Kaiser_

KomradeBishop wrote: »

Sure, rent is too high, but that's a separate problem.

No it's actually the other half of the problem.

You can't just cut out a good portion of potential buyers without looking at the logical knock-on effect this will have on the rental sector.. on top of the significant problems and pressures that already exist in that sector.

There's no supply which means higher prices and thus higher demand for rental properties thus higher rents

What do you think will happen to rents now under these proposals?

dxhound2005

I haven't read through the thread. The only thing that surprised me when I heard about this is that it was not in place already. It used to be in place years ago when I "got on the ladder". For most of the lifetime of my mortgage, interest rates were in double figures. It says here that they reached a max of 16.25% but I'm sure I remember mine being 19%.

http://www.moneyguideireland.com/history-of-mortgage-rates-in-ireland.html

The only consideration should be that the mortgage is affordable and that taxpayers won't ever again be left to pay for people who borrow what they can't pay back. A possible interest rate rise should always be factored into the calculation. The max 80% should protect the taxpayer from having to pay for tens of thousands of non performing loans. The lender can take back posession and not lose money when selling the property on to someone who can afford it.

If people think it is hard to get on the ladder now, it isn't compared to the times when the 20% savings rule was strictly enforced and interest rates were 15% or more. But again there is no point in giving out money to people and then expecting the taxpayer to pay it back when due diligence was not done in the first place.

KomradeBishop

realweirdo wrote: »

Hmm let me see...a large cash gift from a rich relative to help with the deposit. A good job where you earn lots only to lose your well paying job a few years later.
Some people might find it easy to raise a deposit, but after that, they will face the same problems as everyone else.
In a cashrich business people are able to raise cash quickly, but usually struggle in a downturn. These are probably just the type of people to avoid giving mortgages to, boom and bust merchants, as opposed to your regular long term employed in solid professions such as civil servants who will now largely be shut out of getting mortgages.

A deposit is, in general, a good starting indicator of a persons ability to build up the money they will need to pay a mortgage, and it also guarantees a minimum amount of return for the bank on the debt, if it goes bad.

That alone, is more sustainable for the bank, no matter what. It is also more likely to lead to more sustainable loans.

Sustainabilty > All Else.

KomradeBishop

_Kaiser_ wrote: »

Because they're trying to save for a mortgage while simultaneously paying increasing rent? Rent which is probably a fair bit more than the mortgage repayment.

Not everyone is a kid with no bills or dependents either, and most of them can't live rent-free at home with mammy and daddy while they get their deposit together. A good portion of them won't have any cash gifts from parents or relatives to fall back on either

Being able to save a deposit != sustaining a mortgage

You don't help these people, by giving them bigger loans either. You solve that problem by dealing with the rental market issue.

_Kaiser_

KomradeBishop wrote: »

A deposit is, in general, a good starting indicator of a persons ability to build up the money they will need to pay a mortgage, and it also guarantees a minimum amount of return for the bank on the debt, if it goes bad.

That alone, is more sustainable for the bank, no matter what. It is also more likely to lead to more sustainable loans.

Sustainabilty > All Else.

Disagree.. a deposit means nothing - it could be a cash gift, an inheritance, a credit union loan

Sustainability is "can the person make the regular monthly payments comfortably given their income and outgoings with x amount factored in for changes in circumstances etc"

Looking at a person's track record of rental payments and current account transactions will tell you a lot more about this than a lump sum figure at the start

_Kaiser_

KomradeBishop wrote: »

You don't help these people, by giving them bigger loans either. You solve that problem by dealing with the rental market issue.

Agree, but this hasn't been done - thus these proposals are flawed at this time

Address both problems together and today's announcements make sense, but there's been no indication of this - probably because renting in this country is seen as a poor man's choice, or a stop-gap on the road to ownership you have to endure... and of course that many of FG's core vote (and members) are wealthy landlords themselves.

dxhound2005

_Kaiser_ wrote: »

Disagree.. a deposit means nothing - it could be a cash gift, an inheritance, a credit union loan

Sustainability is "can the person make the regular monthly payments comfortably given their income and outgoings with x amount factored in for changes in circumstances etc"

Looking at a person's track record of rental payments and current account transactions will tell you a lot more about this than a lump sum figure at the start

I should have mentioned in my post above that Building Societies insisted on a couple of years monthly savings to the level of at least what the monthly repayments of the mortgage would be. This had to be the source of the deposit.

realweirdo

KomradeBishop wrote: »

A deposit is, in general, a good starting indicator of a persons ability to build up the money they will need to pay a mortgage, and it also guarantees a minimum amount of return for the bank on the debt, if it goes bad.

That alone, is more sustainable for the bank, no matter what. It is also more likely to lead to more sustainable loans.

Sustainabilty > All Else.

Most purchasers of new or second hand homes are couples, either newly married, about to get married or long term married. They have a lot of other expenses. They buy a house, then they have to pay for a wedding, then kids come along. The expenses keep mounting up. When they were young with no big costs, getting the money together for a big deposit was no problem. But with all the extra costs, now they are struggling. And what happens if one loses their job? Its not an indicator at all. Situations change.

matt-dublin

The problem about this is they're still basically allowing you borrow the same amount of money, you just have to have more up front.

Just makes if difficult to get the deposit together. A bit unfair but still men's I can borrow the same about buy a bigger house for the same value I could originally borrow.

Current : Deposit 40k loan 360k total value 400k
New: deposit 80k loan 360k total value €440k

People who can do this will benefit, whereas from jan first a lot of people with 40k can now only borrow €240k total value 280k or wait.

KomradeBishop

matt-dublin wrote: »

Saving isn't the problem, the problem is borrowing term is finite. The people who already have their 2
10% now will need to save for another year or two to achieve their deposits.

Housing prices won't drop, maybe executive sales but negative equity properties will come off the market and trader uppers will end up staying where they are which reduced availability.

This opens up the market to investors who likely have cash anyway and gave no borrowing limitations once they can provide 30% up front.

I don't care how much people view this as an injustice: They are viewing it wrong. Sustainability > All. Giving out mortgages that are more risky = Bad.

Here is Irish economist Brian M. Lucey, giving a quick overview of this:

...
Loan to value limits can be useful, it seems, in curbing house price growth. Some recent suggestions indicates that a 10% increase in global loan to value ratio is associated with 13% increase in nominal house prices. Korea introduced loan to value limits in 2002, and what followed was a stopping of house price increases, at least for 6 to 8 months. The Korean experiment was also associated with reduction in transactions. An important point from the Korean experience is that while the effect may be relatively short, there is a longer run impact on people’s expectations. There’s a lot of evidence that suggests that expectations, expectations of further house price increases in particular, play a huge role in bubble dynamics.
...

http://brianmlucey.wordpress.com/2014/10/03/would-maximum-loan-to-value-ratios-have-much-effect-on-dublin-house-prices/

So that's past evidence, showing that this cools a property boom.

KomradeBishop

_Kaiser_ wrote: »

No it's actually the other half of the problem.

You can't just cut out a good portion of potential buyers without looking at the logical knock-on effect this will have on the rental sector.. on top of the significant problems and pressures that already exist in that sector.

There's no supply which means higher prices and thus higher demand for rental properties thus higher rents

What do you think will happen to rents now under these proposals?

That's an extension of the supply problem...the proper target there, is on fixing the supply problem.

realweirdo

KomradeBishop wrote: »

I don't care how much people view this as an injustice: They are viewing it wrong. Sustainability > All. Giving out mortgages that are more risky = Bad.

Here is Irish economist Brian M. Lucey, giving a quick overview of this:

http://brianmlucey.wordpress.com/2014/10/03/would-maximum-loan-to-value-ratios-have-much-effect-on-dublin-house-prices/

So that's past evidence, showing that this cools a property boom.

Komrade, I will need to investigate the Korean bubble to see what sort of bubble it was. However, the reason for the Dublin "bubble" is demand outstripping supply, massively. One approach is to increase supply. The other is to reduce demand. The CB have opted for the latter option.

matt-dublin

KomradeBishop wrote: »

I don't care how much people view this as an injustice: They are viewing it wrong. Sustainability > All. Giving out mortgages that are more risky = Bad.

Here is Irish economist Brian M. Lucey, giving a quick overview of this:

http://brianmlucey.wordpress.com/2014/10/03/would-maximum-loan-to-value-ratios-have-much-effect-on-dublin-house-prices/

So that's past evidence, showing that this cools a property boom.

I'm giving out because this won't benefit the market until investors are tied up. I'm 32 and have a deposit, currently selling an apartment and looking to rebuy and start a family.

20% is short sited especially when borrowing has been so low on the residential market. It's just going to prevent people being able to buy and could potentially increase homelessness.

KomradeBishop

_Kaiser_ wrote: »

Disagree.. a deposit means nothing - it could be a cash gift, an inheritance, a credit union loan

Sustainability is "can the person make the regular monthly payments comfortably given their income and outgoings with x amount factored in for changes in circumstances etc"

Looking at a person's track record of rental payments and current account transactions will tell you a lot more about this than a lump sum figure at the start

A deposit means first of all, that banks can not extend loans as far as they used to, which means lower house prices and overall lower private debt - which means increased sustainability all around.

Again, despite the minority who will get a gift or take out a loan, a deposit gives a general starting indicator of a persons ability to save, and thus pay a mortgage - it doesn't have to be a perfect indicator.

Senna

Frightening how people are only thinking of their own need to get a house and can't see the big picture.
Statement like "ftb will never be able to buy" "only children of developers can afford the deposit" etc shows how little understanding some posters have on how a market works.

Forget about investors, no market can survive on investors alone, the average person/family dictate the market. Yes Dublin has a shortage of supply but the majority of people in Ireland don't live in Dublin, the central bank doesn't have one policy for Dublin and another the rest of the country.
These measures will stop another property bubble for happening and putting them in place now before supply reaches the demand levels is a good thing for everyone.
This budget will (might) address the housing demand in Dublin, it going to take years to settle, but they had to start somewhere and better to have the lending fundamentals right before stock increases rather than allowing 2000-2006 again where the mistakes were only realised once the last idiot had bought the last shoebox.