Central bank purposes new mortgage protection rules

Daith

lanos wrote: »

if you are an undisciplined saver then i believe you need to grow up a bit
leave home ownership to financial adults

There's no reason they couldn't afford a mortgage and go on trips and save a deposit. Now you're telling them they're bad savers because the goal posts have moved for their deposit.

Going from an 8% deposit to a 20% deposit is a big deal.

lanos

lanos wrote: »

have you ever heard of starter homes

Daith wrote: »

Yes lots of people have. They're now probably in negative equity eagerly waiting for prices to rise.

a starter home doesn't have to be a bad investment
depends WHEN you make the purchase

if you make the purchase when all the evidence suggests prices have bottomed out - good idea

if you make the purchase when all the evidence points to a bubble (mini bubble or otherwise)
and refuse to listen to economists and other experts then thats probably a bad idea

starter homes are for first time buyers who only have cash deposits
larger homes are for people with decent equity who want to trade up.

there will always be people who want to jump the queue

KomradeBishop

Everyone has the perfect right to buy a house. Nobody has the right to a massive loan, in the hundreds of thousands, if they may not be able to pay it back.

If you want to borrow money, you have to do it on the banks and central banks terms - and if the terms they set in order to have a stable housing market, inconvenience you or even alter the course of your life in a significant way, that's just tough - put up with it - I don't want (and I'm sure everyone else doesn't want) to be paying for it when another property bubble inflates and collapses, like we are now with the last one, just because some people want an easier time saving up a deposit.

Daith

lanos wrote: »

starter homes are for first time buyers who only have cash deposits
larger homes are for people with decent equity who want to trade up.

Such a generalization. There may be many first time buyers who can afford to buy a larger home and there could be many people who bought a "starter" home who are stuck there.

Daith

KomradeBishop wrote: »

If you want to borrow money, you have to do it on the banks and central banks terms - and if the terms they set in order to have a stable housing market, inconvenience you or even alter the course of your life in a significant way, that's just tough - put up with it - I don't want (and I'm sure everyone else doesn't want) to be paying for it when another property bubble inflates and collapses, like we are now with the last one.

I agree that these rules make sense (though wish there was some changes to renting here).

My sympathy is with people who are looking to buy now, who may have ad approval in principle and who will be told they need a bigger deposit.

lanos

Daith wrote: »

Going from an 8% deposit to a 20% deposit is a big deal.

8% was the minimum, why do people only want to do the minimum

it is because you are in a rush
the herd is starting to stampede and you are happy to be part of the herd.

i say leave the herd off and keep renting & saving.
when things have settled down, make your move.

and very important, if you need to wait for the next cycle, so be it.

KomradeBishop

Daith wrote: »

I agree that these rules make sense (though wish there was some changes to renting here).

My sympathy is with people who are looking to buy now, who may have ad approval in principle and who will be told they need a bigger deposit.

I have sympathy with those people, only with the fact that the rental and housing market is a mess right now - I have zero sympathy on being just-out-of-range on a deposit though.

The housing/rental markets should be fixed/reformed, but there's no way in hell that money through potentially unsustainable loans should be put into the housing market again.

Daith

lanos wrote: »

it is because you are in a rush
the herd is starting to stampede and you are happy to be part of the herd.

Buying a house is such an Irish thing. It's ingrained in most. It's not a herd mentality.

lanos wrote: »

i say leave the herd off and keep renting & saving.
when things have settled down, make your move.

Like now? People didn't buy through the recession, saved for what they believed they needed to have for a deposit and made their move....except the goal posts have moved.

Rents will go up which means savings will diminish.

What's to say the goal posts won't move when you make your move again?

Peist2007

Daith wrote: »

Like now? People didn't buy through the recession, saved for what they believed they needed to have for a deposit and made their move....except the goal posts have moved.

I dont think the Central Bank can make proposals or decisions based on the self interest of the above.

lanos

Daith wrote: »

Such a generalization. There may be many first time buyers who can afford to buy a larger home and there could be many people who bought a "starter" home who are stuck there.

yes it was a generalization
thats what counts, not specific cases.

if a first time buyer has the large deposit and sufficient income to buy a larger home, fair play to him/her. it is not what one would expect though.

what really counts is the 99% of cases of First time buyers who should be buying starter homes

lanos

Daith wrote: »

Buying a house is such an Irish thing. It's ingrained in most. It's not a herd mentality.

its all about timing
if you want to cross the field, by all means do
just make sure you cross well before the stampede, or just afterwards

and you won't be trampled

20Cent

lanos wrote: »

its all about timing
if you want to cross the field, by all means do
just make sure you cross well before the stampede, or just afterwards

and you won't be trampled

There is no good time. When interest rates are low prices high and vice versa.

lanos

20Cent wrote: »

There is no good time. When interest rates are low prices high and vice versa.

ok i'll try a different approach.

take this scenario

2005 - prices very high - person A (age 22) starts working and saving
2007 - prices reach peak - person A (age 24) cannot afford to buy anywhere, no problem -
2009 - person A (age 26) still cannot afford to buy, bummer
2009 - person A (age 28) CAN afford to buy but doesnt because prices are dropping - wise move

Should person A stop saving ?

no, because he/she does not know what is around the corner
if the goalposts move, it won't matter because he has sufficient cash and is still in a dropping market.

contrast that with Person B (mr impatient)
barely out of college, F*** all deposit saved and wants to buy a large home in a rising market

finally
2011 - Person A buys a starter home in a decent area for a good price with a large deposit.
prices might still be dropping but hardly much more. and not a stampeding herd in sight


moral of the story, save early and often

Electric Sheep

Daith wrote: »

There's no reason they couldn't afford a mortgage and go on trips and save a deposit. Now you're telling them they're bad savers because the goal posts have moved for their deposit.

Going from an 8% deposit to a 20% deposit is a big deal.

The goalposts have moved back to normal. You will just have to deal with it, as generations before you did.

AtomicHorror

Electric Sheep wrote: »

The goalposts have moved back to normal. You will just have to deal with it, as generations before you did.

Do you own a house?

Electric Sheep

AtomicHorror wrote: »

Do you own a house?

Yes, I do. That I put a 20% deposit on, when interest rates and taxes were much higher and wages much lower.

AtomicHorror

Electric Sheep wrote: »

Yes, I do. That I put a 20% deposit on, when interest rates and taxes were much higher and wages much lower.

And if you had been perhaps a month or two from making the mortgage application when the Central Bank put measures in place insisting you needed 40%, would you have thought it fair for someone to tell you to "deal with it?". Imagining for a moment it was a necessary step, a wise move to control the market, though it was not yet clear if it would work.

I suppose you'll say now that you would have just got on with it, but you're speaking from something of a position of privilege, insulated from what this means for new buyers. You're not displaying any empathy with those of us who may accept the necessity of this change, but are still hurt by it.

I get the sense that you also dislike the fact that so many who bought after you have had it easier than you, even though it's debatable whether they really have.

Daith

lanos wrote: »

what really counts is the 99% of cases of First time buyers who should be buying starter homes

No they should be buying homes they want live in. Not ones they plan to sell because that isn't working out too well at all for people now.

AtomicHorror

Daith wrote: »

No they should be buying homes they want live in. Not ones they plan to sell because that isn't working out too well at all for people now.

Agreed. I know at least two couples who have owned "starter" homes for about 7 or 8 years now. One couple can't leave, the other are renting their starter place out and living in another place belonging to relatives. I don't know whether that's better or worse than being stuck in the mess that is our rental market, but it sure doesn't seem fun.

Daith

AtomicHorror wrote: »

Agreed. I know at least two couples who have owned "starter" homes for about 7 or 8 years now. One couple can't leave, the other are renting their starter place out and living in another place belonging to relatives. I don't know whether that's better or worse than being stuck in the mess that is our rental market, but it sure doesn't seem fun.

Indeed and now they will probably have to wait longer because people need more of a deposit.

I'm in favour of the new rules but as I said for people looking to buy now and believing they had enough I do feel sympathy for.

AtomicHorror

lanos wrote: »

Yes, the rules have changed, rules always change, everywhere, get over it.

Oh sorry, what was I thinking? I've gotten over it now, thanks. Great suggestion.

Electric Sheep

AtomicHorror wrote: »

And if you had been perhaps a month or two from making the mortgage application when the Central Bank put measures in place insisting you needed 40%, would you have thought it fair for someone to tell you to "deal with it?". Imagining for a moment it was a necessary step, a wise move to control the market, though it was not yet clear if it would work.

I suppose you'll say now that you would have just got on with it, but you're speaking from something of a position of privilege, insulated from what this means for new buyers. You're not displaying any empathy with those of us who may accept the necessity of this change, but are still hurt by it.

I get the sense that you also dislike the fact that so many who bought after you have had it easier than you, even though it's debatable whether they really have.

If we'd tried to buy what current first time buyers think they are "entitled" to - a three bed semi in a good neighborhood rather than our two up two down terraced house in what was then a very working class neighborhood, we WOULD have had to come up with a 40% deposit. The bank would still have given us only the amount of mortgage based on our extremely modest wages. They didn't lash out extra money based on "notions":rolleyes:

AtomicHorror

Electric Sheep wrote: »

If we'd tried to buy what current first time buyers think they are "entitled" to - a three bed semi in a good neighborhood rather than our two up two down terraced house in what was then a very working class neighborhood, we WOULD have had to come up with a 40% deposit. The bank would still have given us only the amount of mortgage based on our extremely modest wages. They didn't lash out extra money based on "notions":rolleyes:

What do I think I'm entitled to? What are my notions?

fits

Electric Sheep wrote: »

If we'd tried to buy what current first time buyers think they are "entitled" to - a three bed semi in a good neighborhood rather than our two up two down terraced house in what was then a very working class neighborhood, we WOULD have had to come up with a 40% deposit. The bank would still have given us only the amount of mortgage based on our extremely modest wages. They didn't lash out extra money based on "notions":rolleyes:

Careful you dont fall off that high horse of yours. The house cost you what??? 40 grand I bet if even that.

lanos

Electric Sheep wrote: »

If we'd tried to buy what current first time buyers think they are "entitled" to - a three bed semi in a good neighborhood rather than our two up two down terraced house in what was then a very working class neighborhood, we WOULD have had to come up with a 40% deposit. The bank would still have given us only the amount of mortgage based on our extremely modest wages. They didn't lash out extra money based on "notions":rolleyes:

and when did you buy your Two Up, Two Down Terraced house, what year?

Electric Sheep

AtomicHorror wrote: »

What do I think I'm entitled to? What are my notions?

I don't know, you tell me.

Electric Sheep

lanos wrote: »

and when did you buy your Two Up, Two Down Terraced house, what year?

1988.

Electric Sheep

fits wrote: »

Careful you dont fall off that high horse of yours. The house cost you what??? 40 grand I bet if even that.

Less, actually. But again, our wages were much much less as well.

fits

Ha it wasn't even 40k. Lol!

Electric Sheep

fits wrote: »

Ha it wasn't even 40k. Lol!

I know, it seems funny now. That was back when house prices were in line with actual wages. I guess we will be returning there soon.

AtomicHorror

Electric Sheep wrote: »

I don't know, you tell me.

Why should I? You were happy to judge on such limited information. A moment ago you were implying I had notions, that I had a sense of entitlement to something. This was your justification for telling me I have to "deal with it".

Now suddenly you don't know my notions or what I feel entitled to?

What a joke.

lanos

lanos wrote: »

Yes, the rules have changed, rules always change, everywhere, get over it.

AtomicHorror wrote: »

Oh sorry, what was I thinking? I've gotten over it now, thanks. Great suggestion.

i include myself in that too

i work for public service, technical position.
what does that mean to most people
Job for life, assured pension
thats what my colleagues believe

i don't accept that will be the case when i retire
i don't even accept that my job will remain as safe as it currently is.
maybe the public service will be completely overhauled.
in fact it should be. i work with a lot of wasters who should be unemployed

expect the worst and you won't be disappointed.

last year remember the proposed 10% tax on savings in Cyprus
that was a lot more serious than a tightening up of mortgage lending requirements.

remember anything can happen

buying a house is a financial transaction, and should not be an emotional issue.
if you manage to separate sound financial reasoning from emotional responses, you will be OK

fits

Electric Sheep wrote: »

I know, it seems funny now. That was back when house prices were in line with actual wages. I guess we will be returning there soon.

average industrial wage in 1988 was 268 per week, euro equivalent. Say for a 40k mortgage (euro) you'd need 8 k or 30 times average weekly wage.

In 2013 average wage was 670 euro. For average house in Dublin say 300k you'd need 60k deposit or 88 times average weekly wage.

Electric Sheep

fits wrote: »

average industrial wage in 1988 was 268 per week, euro equivalent. Say for a 40k mortgage (euro) you'd need 8 k or 30 times average weekly wage.

In 2013 average wage was 670 euro. For average house in Dublin say 300k you'd need 60k deposit or 88 times average weekly wage.

Yes, that is why houses are overpriced now, and the prices need to come down. If people can only borrow based on the deposit saved, prices will have to come down to realistic levels again. Most people, especially first time buyers, will benefit from this.

Dravokivich

Electric Sheep wrote: »

Yes, that is why houses are overpriced now, and the prices need to come down. If people can only borrow based on the deposit saved, prices will have to come down to realistic levels again. Most people, especially first time buyers, will benefit from this.

The market is looking to promote the most the house can go for, not what people can reasonably be expected to pay for it. Prices won't go down as long as people are going to pay amounts they don't understand they can never afford.

AtomicHorror

Electric Sheep wrote: »

Yes, that is why houses are overpriced now, and the prices need to come down. If people can only borrow based on the deposit saved, prices will have to come down to realistic levels again. Most people, especially first time buyers, will benefit from this.

Yeah, but just a few posts ago you were very strongly implying you had it tougher than the current, entitled generation. So again, it doesn't actually seem like you've got much on your side apart from assumptions.

Iwasfrozen

fits wrote: »

average industrial wage in 1988 was 268 per week, euro equivalent. Say for a 40k mortgage (euro) you'd need 8 k or 30 times average weekly wage.

In 2013 average wage was 670 euro. For average house in Dublin say 300k you'd need 60k deposit or 88 times average weekly wage.

Constraining the availability of credit will force house prices to come down.

Electric Sheep

Dravokivich wrote: »

The market is looking to promote the most the house can go for, not what people can reasonably be expected to pay for it. Prices won't go down as long as people are going to pay amounts they don't understand they can never afford.

For the majority of buyers, if they can't borrow what they can't afford, they can't pay it.

Frank Lee Midere

fits wrote: »

average industrial wage in 1988 was 268 per week, euro equivalent. Say for a 40k mortgage (euro) you'd need 8 k or 30 times average weekly wage.

In 2013 average wage was 670 euro. For average house in Dublin say 300k you'd need 60k deposit or 88 times average weekly wage.

Yes. Houses are more expensive. Could this because in 1988 banks only loaned to people at 3x income and asked for 20% deposit. Could that be it?

There has to be a reason.

realweirdo

The most likely outcome of all this is a gradual and sustained increase in rents for tenants as demand inevitably grows. House buying will stagnate but so also will those moving from renting to purchasing homes. Greedy landlords will push up prices because they know tenants have no choice but to pay. This will make saving to buy a house even more difficult, exacerbating the stagnant housing market. Will house prices come down significantly? Probably not. No-one wants to sell their house at a loss. They will just hold onto it and hope prices go up again. I own property and that's certainly what I will be doing. Why sell when you can make a profit renting it out?

Electric Sheep

realweirdo wrote: »

The most likely outcome of all this is a gradual and sustained increase in rents for tenants as demand inevitably grows. House buying will stagnate but so also will those moving from renting to purchasing homes. Greedy landlords will push up prices because they know tenants have no choice but to pay. This will make saving to buy a house even more difficult, exacerbating the stagnant housing market. Will house prices come down significantly? Probably not. No-one wants to sell their house at a loss. They will just hold onto it and hope prices go up again. I own property and that's certainly what I will be doing. Why sell when you can make a profit renting it out?

Does that make you a greedy landlord too? Or should it be OK for you to make a profit, but not other landlords?

Is the guy in negactive equity who rents out his place so he can move to a more suitable one a greedy landlord too?

How do you determine which landlords are greedy?

realweirdo

Electric Sheep wrote: »

Does that make you a greedy landlord too? Or should it be OK for you to make a profit, but not other landlords?

Is the guy in negactive equity who rents out his place so he can move to a more suitable one a greedy landlord too?

How do you determine which landlords are greedy?

It makes me a sensible landlord. I bought my property as an investment. Most people buy property as an investment with the expectation it will go up in price. Most people can ride out the cycle and wait until prices come back. Prices still have not returned to the 2004-2007 peak. Anyone who sells now will make a loss. If they sell with houses going down further, they will make a bigger loss and have to compensate the bank. People will just hold on to their property. I imagine I am not alone in that view. Indeed, many landlords struggled to rent out their properties in recent years but with a new increase in demand for rented properties they have will have no such problem. So why would they bother selling. And banks won't have any repossessed properties to sell either. What is most likely to happen is an even further restriction of supply.

Amy100

AtomicHorror wrote: »

If the worst comes to the worst, you do have options. That deposit you've saved would go a long way outside of Dublin. I'd say you could stay within 30 minutes drive and have something very nice. Of course this means little if you really have your heart set on Dublin.

I work in dublin and so does my partner so really don't want to spend hours commuting! Have grown up in Dublin and have never lived anywhere else! Also have a permanent job here so am stuck!