Central Bank mortgage lending rules discussion

Flatzie_poo

PhoenixParker wrote: »

Ah yes, the strategy employed for 2000-2007 and then again from 2013 - 2015.

I'd prefer we kept in unsimple as the CB and their data analysis suggests.

Banks were borderline unregulated in 2007. That's just a ridiculous comparison.

My point keeps regulation in tow, and provides that those who can afford more, and are still lending responsibly to their means.

Flatzie_poo

Flatzie_poo wrote: »

That's not what I said. My point is that there are no limits in the number of "exemptions" granted where affordable.

Where not affordable, the current 3.5x rules kick in.

But if exemptions are limitless banks will "decide" a lot more people can afford more than 3.5x their salary. Where as with limited exemptions only the strongest cases get one.

Flatzie_poo

SarahMollie wrote: »

Yes but define "affordable"

This would mean that the banks themselves make that distinction, and they've proved by bankrupting our country that they cannot be trusted to do this, as greed will always get in their way.

Having a ceiling on the exceptions means that must choose only their very best prospective customers to afford such exceptions to.

They're regulated. They currently keep back-up on the exemptions granted. I'm just saying don;t have "x" number of these, judge it on a case by case basis. Where those who can afford are approved. Make it dynamic.

They can be audited by CB yearly on this.

Flatzie_poo

Kamden Small Ivy wrote: »

But if exemptions are limitless banks will "decide" a lot more people can afford more than 3.5x their salary. Where as with limited exemptions only the strongest cases get one.

That's not the case. They have more exemptions in January 2016 than November 2016. a stronger applicant in November compared to one approved in January, could be rejected due to the number of exemptions available. That's why I don't agree with a limited number of these.

SarahMollie

Flatzie_poo wrote: »

Banks were borderline unregulated in 2007. That's just a ridiculous comparison.

My point keeps regulation in tow, and provides that those who can afford more, and are still lending responsibly to their means.

You cant have it both ways. You want to keep regulation, yet you want to weaken the Central Bank by allowing the banks to self regulate.

That just doesnt work.

Flatzie_poo

Michael D Not Higgins wrote: »

The exemptions are there for when it is affordable. The CBI has the economic theory that backs up that 3.5 is the right multiple limit for affordability for most instances with the knowledge that there will be exceptions to this rule. That's why there are exemptions.

Exactly. Not in all instances. This is key to my point.

Michael D Not Higgins

Flatzie_poo wrote: »

That's not the case. They have more exemptions in January 2016 than November 2016. a stronger applicant in November compared to one approved in January, could be rejected due to the number of exemptions available. That's why I don't agree with a limited number of these.

The fact that the bank has to hold off buyers to the next quarter to use up more exemptions shows the poor handling from their side. They can't wait to lend people more money so end up using all their exemptions for a quarter in less than a month.

Flatzie_poo

Flatzie_poo wrote: »

That's not the case. They have more exemptions in January 2016 than November 2016. a stronger applicant in November compared to one approved in January, could be rejected due to the number of exemptions available. That's why I don't agree with a limited number of these.

Its the banks that's choosing to use them up early in the year, I'd imagine the CB envisaged they would spread them out over the year but the banks decided to grant as many as they can as fast as they can.

Flatzie_poo

SarahMollie wrote: »

You cant have it both ways. You want to keep regulation, yet you want to weaken the Central Bank by allowing the banks to self regulate.

That just doesnt work.

I never said the banks should self-regulate. Not anywhere.

SarahMollie

Flatzie_poo wrote: »

That's not the case. They have more exemptions in January 2016 than November 2016. a stronger applicant in November compared to one approved in January, could be rejected due to the number of exemptions available. That's why I don't agree with a limited number of these.

Then they'll get it in January the next year. Or the banks learn not to give away the exceptions so early in the year.

Property is a slow business, and I'd rather the odd buyer was inconvenienced for a few months, than let the banks write their own rules again.

SarahMollie

Flatzie_poo wrote: »

I never said the banks should self-regulate. Not anywhere.

Just that they should be able to define what "affordable" means.

Being allowed to make up their own rules is self regulation.

Flatzie_poo

SarahMollie wrote: »

Then they'll get it in January the next year. Or the banks learn not to give away the exceptions so early in the year.

Why not improve what's there? If they are going to get approved, approved them. They shouldn;t have to wait a few months if their financially prudent.

SarahMollie wrote: »

Property is a slow business, and I'd rather the odd buyer was inconvenienced for a few months, than let the banks write their own rules again.

Where have I once said banks should write their own rules?

SarahMollie

Flatzie_poo wrote: »

Why not improve what's there? If they are going to get approved, approved them. They shouldn;t have to wait a few months if their financially prudent.



Where have I once said banks should write their own rules?

1. Its not the borrowers financial prudence I'd be worried about.

2. What is allowing them to set affordability criteria if not writing their own rules.

PhoenixParker

Flatzie_poo wrote: »

Why not improve what's there? If they are going to get approved, approved them. They shouldn;t have to wait a few months if their financially prudent.



Where have I once said banks should write their own rules?

If the central banks aren't writing the rules about a % of exemptions, then who is?

Flatzie_poo

SarahMollie wrote: »

1. Its not the borrowers financial prudence I'd be worried about.

2. What is allowing them to set affordability criteria if not writing their own rules.

1) Then if borrowers are prudent, and borrow what's repayable, what's your issue?

2) The Central Bank. Post yearly audit, fine or restrict the lending of any entity found to have lent irresponsibly.

Flatzie_poo

PhoenixParker wrote: »

If the central banks aren't writing the rules about a % of exemptions, then who is?

See above.

Flatzie_poo

Flatzie_poo wrote: »

1) Then if borrowers are prudent, and borrow what's repayable, what's your issue?

2) The Central Bank. Post yearly audit, fine or restrict the lending of any entity found to have lent irresponsibly.

But even the most prudent borrower is still a risk so limiting the number of people who get exemptions is still making the banks loan book more sustainable.

Without the number of exemptions being limited the amount of money being borrowed would shoot rapidly and therefore so would house prices.

SarahMollie

Flatzie_poo wrote: »

1) Then if borrowers are prudent, and borrow what's repayable, what's your issue?

2) The Central Bank. Post yearly audit, fine or restrict the lending of any entity found to have lent irresponsibly.

1.Again, whos defining their prudence? You're using subjective terms as if they're objective.

2. Closing the stable door once the horse has bolted. We've seen how well this works. And again, if you don't have set criteria, how can the CB impose fines without an objective standard to compare it against. It just doesnt work.

Not to mention the knock on effect that your suggestion would have on house prices, which does not benefit the same consumer that you're apparently advocating for.

We finally have a good, strong system in place, stop trying to undermine it.

PhoenixParker

Flatzie_poo wrote: »

See above.

So instead of the banks having a nice clear standard to meet which can be readily audited by the CB, they should have a huge fuzzy line that they can dip their toe over, which is difficult for the CB to audit and which exposes the banks to risk of unexpectedly failing a CB audit and thus getting fined?

That makes no sense.

SarahMollie

PhoenixParker wrote: »

So instead of the banks having a nice clear standard to meet which can be readily audited by the CB, they should have a huge fuzzy line that they can dip their toe over, which is difficult for the CB to audit and which exposes the banks to risk of unexpectedly failing a CB audit and thus getting fined?

That makes no sense.

This!

Blurring the lines only gives the banks room to misbehave, benefiting only themselves.

Flatzie_poo

PhoenixParker wrote: »

So instead of the banks having a nice clear standard to meet which can be readily audited by the CB, they should have a huge fuzzy line that they can dip their toe over, which is difficult for the CB to audit and which exposes the banks to risk of unexpectedly failing a CB audit and thus getting fined?

That makes no sense.

But the standard is not clear right now! Exemptions exist presently!

Risk exposure is an entirely different matter. Banks send bi-weekly reports to the CB and ECB of their risk exposure. That can't get out of hand again.

Flatzie_poo

Kamden Small Ivy wrote: »

But even the most prudent borrower is still a risk so limiting the number of people who get exemptions is still making the banks loan book more sustainable.

Without the number of exemptions being limited the amount of money being borrowed would shoot rapidly and therefore so would house prices.

The market is the market. Prices will go up and down regardless. If people can afford they still get the loans. If prices go up to extraordinary levels then they still only get a loan affordable to them. They have to settle for a cheaper house until the market subsides.

They never lose their means testing of what's affordable to them.

Flatzie_poo

Flatzie_poo wrote: »

The market is the market. Prices will go up and down regardless. If people can afford they still get the loans. If prices go up to extraordinary levels then they still only get a loan affordable to them. They have to settle for a cheaper house until the market subsides.

They never lose their means testing of what's affordable to them.

Its better to keep prices low though if possible as this allows more people to buy better houses. if prices do go way way up of course people will still be able to buy but they will be spending more for poorer quality/size/located houses.

I don't really see any merit to your arguments at all. If people are in good financial positions they are eligible for an exemption, I'd imagine nearly everyone who is eligible will get one even if it takes a few months longer. There are no real advantages in allowing unlimited exemptions and a lot of dis-advantages.

Also you need a set of general rules like 3.5x gross salary etc. Going into the depths of every persons spending is not feasible. A bank will take an overall view of their incomings and outgoings and make a call. You gave an example of couple A and B. Couple B could have twins a year after getting the mortgage and couple A could give up the fags suddenly, couple A are in a better financial position than couple B.

Flatzie_poo

Kamden Small Ivy wrote: »

I'd imagine nearly everyone who is eligible will get one even if it takes a few months longer.

This is my point, why keep it limited if everyone is eligible?

It's backward to refuse someone, but then approve them in 2 months.

SarahMollie

The point, is to put a limitation on the banks lending so that they have to choose only the best candidates to give exceptions to, and it nullifies their ability to be greedy.

If someone has to wait a few months for an approval, so be it. That an acceptable outcome IMO.

Letting Banks dictate lending levels, which they will always seek to increase, is unacceptable.

Flatzie_poo

Flatzie_poo wrote: »

This is my point, why keep it limited if everyone is eligible?

It's backward to refuse someone, but then approve them in 2 months.

Its not because its spreading out the risk, everyone isn't being approved at the same time thus reducing the overall exposure.

It also slows things down a bit and gives the bank more of a chance to assess the person when they come back again in a few months to see if they are still as good a candidate etc.

It might be a year also before someone gets their exemption or they may be eligible but not get it and settle for less etc.

Michael D Not Higgins

I've first had to split this discussion out from the other thread for being off topic, now I had to delete some posts for attacking the poster not the post.

This is the final warning to everyone.

Villa05

Flatzie_poo wrote:

Why should couple B be limited to 3.5x their salary of their smart and rational enough to be able to afford more?

If they are smart, they know the rules work in there favour.
If they are prudent they know that it will give them a competitive advantage over the similar couples who spend unwisely

jay0109

Flatzie_poo wrote: »

Risk exposure is an entirely different matter. Banks send bi-weekly reports to the CB and ECB of their risk exposure. That can't get out of hand again.

:eek:
Thats some statement....have a look at AIB's history for example?

SarahMollie

Whistle blower in the news this morning - basically saying that AIB are being a little too optimistic as to how they're classifying their impaired loans.

But yes, lets loosen the reigns, sure whats the worst that could happen!