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How does the bank lending rules help the working class?
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Just did a quick search on daft, there are 34 houses with at least 3 bedrooms for sale under €200k at the moment in Dublin. Your choices are Clondalkin, Finglas, Balbriggan, Santry, Ballyfermot and Mulhuddart0
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Round Cable wrote: »There are major issues basing lending rules on pre tax salary. Worker A on €60k can borrow 100% more money than Worker B on €30k. But they actually only take home 60% more pay.
This greatly disadvantages lower earners, and a more fair way would be to introduce a multiplier based on after tax income.
Not really.
Basic living and fixed costs are (or can be) similar for a person regardless of their income. The person on 60k a year likely has a lot more than twice the discretionary disposable income than the person on 3k a year.
For example, if you compare the "fixed" bills for the house in Killiney vs the one in Killinarden. There might not be a whole lot of difference for the heating bills for example. Granted the house in Killiney might be bigger and more exposed to the sea breeezes but it is probably insulated better. And the house in Killinarden, although perhaps not as well insulated can keep down it's heating costs by taking advantage of the heat coming off the stolen cars crashed and burning in the front garden.
Anyway, point being that the marginal utility (in terms of being able to pay his mortgage with it) of the 60k mans gross one Euro is probably more than double that of the 30k fella (or lady of course).0 -
riffmongous wrote: »Just get rich parents and buy with cash stupid*
*Irish times advice a few months ago
While a plausible suggestion, a possible alternative might be to upgrade partner instead :pac:0 -
Round Cable wrote: »There are major issues basing lending rules on pre tax salary. Worker A on €60k can borrow 100% more money than Worker B on €30k. But they actually only take home 60% more pay.
This greatly disadvantages lower earners, and a more fair way would be to introduce a multiplier based on after tax income.
Worker A on 60k pays about 13k in tax so comes out with 47k or around 900 a week
Person B on 30k pays around 3k in tax and comes out with 27k or around 520 a week
So yes, double gross does not equal double take home, you are correct
Now, the guy on 520 has to spend 200 euro a week to get in and out of work, insure and tax the car and feed himself and pursue a hobby, just money he spends on himself, a few pints at weekend, ticket for football match. Now he has 320 a week and will have to have some sort of emergency fund if the car breaks or the fridge breaks etc.. 50 euro a week so down to 270 now
A few clothes here and there, maybe a phone bill, Internet sub, Netflix he's down close to 200 a week here now after spending 320
The guy on 900 has same hobbies same commute same food bill. So he has 700 left after looking after a few essentials. He must also save 50 a week for rainy day fund, but now has 650 left. Subscriptions etc bring this to about 580 like the guy above, 70 a week for other little things. After a few essentials and not being flamboyant, the guy on double the gross has more than double the discretionary spending power of the guy on lower salary.
He has nearly 3 times as much to pay a mortgage with. OK the numbers are made up but probably not a million miles away. You're going to be to the pin of your collar trying to pay rent or a mortage on 30k unless you have literally no expenses otherwise
Dental visits, doctor visits will put a massive dent in it too0 -
Salary Negotiator wrote: »Can you expand on that? How do measures which help keep prices in check guarantee that the average worker can’t afford a 3 bed semi?
I’m not sure how much further I can expand to be honest..
The rule is 3.5 times your combined income, if this total plus €25,000ish (which takes a long time to save if your paying high rent) is less than the cheapest house in my area then this rule at the moment guarantees that I can not afford that cheapest house.
I don’t have all the answers but I do know that this CB rule guarantees the average worker can’t afford a 3 bed semi in Celbridge.0 -
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The rule is a sound one: it stops people from buying houses that they cannot afford to maintain. It's horrible meeting an old person whose house is breaking, but they simply cannot afford to fix it, so they have to live with a leaking roof, dodgy electrics, drafty windows, no shower, etc.
OP, to be blunt, you are earning an average of 27.5k each. Maybe one of you is a little higher, one a little lower, Whatever. It's still a very low wage. Its not enough to buy and maintain a house. And - critically -the wage from one of you would not be enough to live on if a female-bodied person on the house got pregnant and was off work for six months.
Yes, it sucks that you cannot afford to buy where you grew up. And it sucks that you're stuck between really poor (would qualify for a council house eventually) and wealthy enough to buy where you want. But this kind of trap is a feature of pretty much all welfare systems. Rage about it all you want, but it will do you no good.
What you can do about it is to focus on study and getting a better paying job. Realistically, that is the only way out if you don't want to move locations.0 -
Some people suggest that increasing mortgage regulations from 3,5 to 4,5 will increase price of houses.
But keeping it at 3,5 causes renting costing more. I would prefer if, people could take mortgage and pay for their own house than pay landlords lucky enough to buy houses in different times.0 -
I’m not sure how much further I can expand to be honest..
The rule is 3.5 times your combined income, if this total plus €25,000ish (which takes a long time to save if your paying high rent) is less than the cheapest house in my area then this rule at the moment guarantees that I can not afford that cheapest house.
I don’t have all the answers but I do know that this CB rule guarantees the average worker can’t afford a 3 bed semi in Celbridge.
But that assumes prices are static and not responsive to the market.
In your example you can’t afford the cheapest house regardless of the CB limits, they’re an irrelevance to you. Your problem is that while demand is high there will always be someone earning more than you who can outbid you for that house.
In essence you’re in competition with other couples for that house and if they earn more then more often that not they will outbid you on the house whether you both borrow 3.5 or 5 times your salary.0 -
2Mad2BeMad wrote: »
You can't buy a house in Dublin for 213k, or at least one that does not need a considerable amount of investment to make it livable.
Depends on where you look in all honesty.
Two houses within 2 mins walking distance of me recently sold for 180k & 210k respectively, both north Dublin (bordering on meath). Both decent enough & relatively mature area/estate, both in move in condition, both 3 bed & both have private front driveway and decent back gardens. Both 15mins from train station & 10 minutes from a bus to the city centre. The 180k one was cheaper cause it is terraced.0 -
There is a finite supply of housing available near any city, especially a capital city where all the industry is. The financial muscle of people looking to buy these dictates the price. This includes savings and mortgage capability.
A couple on 55k are up against couples on 70/80/90/100k and there aren't enough houses to cater for everyone
I see 3 bedrooms in celbridge being mentioned here as some sort of a compromise to living in Dublin. Trust me, couples on far more than 100k are living in 3 bed semis in celbridge and are very happy to do so, the 55k couple are up against them too.
It's going to be difficult to buy anything nice under 200k without moving away from Dublin or buying something needing a lot of work, both of which bring their own additional expenses.0 -
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Salary Negotiator wrote: »But that assumes prices are static and not responsive to the market.
In your example you can’t afford the cheapest house regardless of the CB limits, they’re an irrelevance to you. Your problem is that while demand is high there will always be someone earning more than you who can outbid you for that house.
In essence you’re in competition with other couples for that house and if they earn more then more often that not they will outbid you on the house whether you both borrow 3.5 or 5 times your salary.
I kind of follow you but not sure I agree with you. You say ‘in your example you can’t afford the cheapest house regardless of the CB limits’ that part I don’t follow. I’m 10 grand short, surely if I can borrow more I now have enough..?
The couple that earn more can now borrow more aswell so they will be looking at nicer houses ( I’m looking at the cheapest)
I realise that more people can now afford the house I’m looking at and the price may go up but it may still be in budget for me.
At the moment I definitely can not afford that house because of the CB rule
Do you get my point or am I looking at this arseways??
Basically I have a chance of getting that house if the rule changes.
At the moment I have no chance.0 -
In a supply constrained market there's a finite supply of 'nicer houses' for the couple you're competing with. It's just as likely they will just pay more for the house you are looking at.
If lending multiples are relaxed, thousands of new buyers are introduced to the market.0 -
In a supply constrained market there's a finite supply of 'nicer houses' for the couple you're competing with. It's just as likely they will just pay more for the house you are looking at.
If lending multiples are relaxed, thousands of new buyers are introduced to the market.
I hear you but it’s a slight chance of being able to afford it against no chance.0 -
I kind of follow you but not sure I agree with you. You say ‘in your example you can’t afford the cheapest house regardless of the CB limits’ that part I don’t follow. I’m 10 grand short, surely if I can borrow more I now have enough..?
The couple that earn more can now borrow more aswell so they will be looking at nicer houses ( I’m looking at the cheapest)
I realise that more people can now afford the house I’m looking at and the price may go up but it may still be in budget for me.
At the moment I definitely can not afford that house because of the CB rule
Do you get my point or am I looking at this arseways??
Basically I have a chance of getting that house if the rule changes.
At the moment I have no chance.
I get your thinking now. So for that other couple who can borrow more, there another couple earning more who can also borrow more so the 3rd couple buy the nicer house while the couple have to make do with the cheapest house.
There are more couples than houses so you as the lowest earners are always the last to be able to purchase.0 -
I kind of follow you but not sure I agree with you. You say ‘in your example you can’t afford the cheapest house regardless of the CB limits’ that part I don’t follow. I’m 10 grand short, surely if I can borrow more I now have enough..?
The couple that earn more can now borrow more aswell so they will be looking at nicer houses ( I’m looking at the cheapest)
I realise that more people can now afford the house I’m looking at and the price may go up but it may still be in budget for me.
At the moment I definitely can not afford that house because of the CB rule
Do you get my point or am I looking at this arseways??
Basically I have a chance of getting that house if the rule changes.
At the moment I have no chance.
There will be someone earning a little less than you that wants to buy too. If they stretched the rules a little bit for you they need only stretch the rules a little more for the guy earning just below you.. And a little more again for someone behind that... And so on
I wish you best of luck as 12 years ago I was in my 20s and dearly wanted to buy a house and couldn't afford, well I could have gotten a celtic tiger no checks done mortgage but it would have wiped me out with payments. Then the bust came, I saw my chance and with the lending rules tightened house prices came down and I got one. So that's my story, and I hope you get one too you seem to have your head screwed on and just bide your time. It's never too late to upskill either, it's often overlooked as a way to buy a house. Qualify in a higher paid occupation if you can0 -
I hear you but it’s a slight chance of being able to afford it against no chance.
Unfortunately there's no logical basis for your theory. If lending limits go up, people earning more than you will still be able to outbid you, driving property prices higher.
Your solution is to improve YOUR chances, not everyones chances. That may be through something like an RBI mortgage, pay-rise, change of career etc.0 -
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Mrs OBumble wrote: »
OP, to be blunt, you are earning an average of 27.5k each. Maybe one of you is a little higher, one a little lower, Whatever. It's still a very low wage. Its not enough to buy and maintain a house. And - critically -the wage from one of you would not be enough to live on if a female-bodied person on the house got pregnant and was off work for six months.
Yes, it sucks that you cannot afford to buy where you grew up. And it sucks that you're stuck between really poor (would qualify for a council house eventually) and wealthy enough to buy where you want. But this kind of trap is a feature of pretty much all welfare systems. Rage about it all you want, but it will do you no good.
What you can do about it is to focus on study and getting a better paying job. Realistically, that is the only way out if you don't want to move locations.
This is the crux of it.
Unfortunately not everybody is going to be able to afford to buy a house in their lifetime, the rental market (if it worked properly which at the moment it doesn't) would cover those who can't afford to own.
If you are at the start of your careers then as has been suggested, keep saving and when your salaries go up you'll be able to buy within the CBI rules. Or look at changing careers to something with more salary growth potential.
You can't blame the rules for not letting you buy, they are there for a bigger reason - you need to earn more money.0 -
Some people suggest that increasing mortgage regulations from 3,5 to 4,5 will increase price of houses.
But keeping it at 3,5 causes renting costing more. I would prefer if, people could take mortgage and pay for their own house than pay landlords lucky enough to buy houses in different times.
In the budget for 2005, the threshold below which FTB's were exempt from Stamp Duty was set at €317,500. Within weeks if not days, the bottom end of the market was marked up to €317,500.
Everything that is done to increase the purchase power of the broad population of prospective house buyers will be sucked up by increases in house prices. Anyone who could outbid you before an increase in income multiplier can outbid you afterwards, the only difference is anyone who makes it across the line to buy, ends up paying more.0 -
I kind of follow you but not sure I agree with you. You say ‘in your example you can’t afford the cheapest house regardless of the CB limits’ that part I don’t follow. I’m 10 grand short, surely if I can borrow more I now have enough..?
The couple that earn more can now borrow more aswell so they will be looking at nicer houses ( I’m looking at the cheapest)
I realise that more people can now afford the house I’m looking at and the price may go up but it may still be in budget for me.
At the moment I definitely can not afford that house because of the CB rule
Do you get my point or am I looking at this arseways??
Basically I have a chance of getting that house if the rule changes.
At the moment I have no chance.
You're looking at it arseways, unfortunately.
If there are 5 houses available, and 10 couples looking to buy, the 5 highest earning couples will get to buy, regardless of the multiple you use.
Going from 3.5 to 4 or 5 times won't change the outcome, just how much of those peoples income goes to servicing the mortgage.0 -
alias no.9 wrote: »In the budget for 2005, the threshold below which FTB's were exempt from Stamp Duty was set at €317,500. Within weeks if not days, the bottom end of the market was marked up to €317,500.
Everything that is done to increase the purchase power of the broad population of prospective house buyers will be sucked up by increases in house prices. Anyone who could outbid you before an increase in income multiplier can outbid you afterwards, the only difference is anyone who makes it across the line to buy, ends up paying more.
I knew a fella back in the day who was bidding for a property. I think there used to be a threshold for tamp duty but this property would have been below that (It could have been some other tax or levy). Whatever it was, this fella would have been exempt because he was a FTB.
All I remember is he wanted it and increased his bid to just over the threshold. His logic was that that other bidders were not FTBs and would not bid that high because it would bring the extra tax liability for them.
But he upped his bid by something like 25% from the advertised price to do that.
The point is that, like you say, giving that relief at a certain level, just floors the market at that level.0 -
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I kind of follow you but not sure I agree with you. You say ‘in your example you can’t afford the cheapest house regardless of the CB limits’ that part I don’t follow. I’m 10 grand short, surely if I can borrow more I now have enough..?
Think of it this way. Suppose yourself and Pat both want a house. There are only two bidders at the auction and it has just been put on the market by the auctioneer at 200k.
You can pay 260k for it (mixture of mortgage and deposit/savings). Pat only has access to 250k.
Then you pay 251k for the house.
Now suppose, before the auction, Pat's Bank increase his approval to 290k. But they increased for everyone and so now you can spend 300k.
Now you pay 291k for the house.
Giving you both more credit just made the previous owner wealthier.0 -
Buy a two bed terrace. Or an apartment.
Why does it have to be a three bed semi D? Also, why is Ballyfermot or Tallaght not an option?0 -
2Mad2BeMad wrote: »
I think the rules need to be changed, and its not only to suit me but to suit alot of people.
It can't just be a 3.5 and thats it, there has to more to look into then that.
Put simply it's not....
...the CBI mortgage rule allows for 20% of first time buyers to borrow in excess of 3.5
https://centralbank.ie/consumer-hub/explainers/what-are-the-mortgage-measures
There is flexibility in the current system. It's up to you to convince a bank you're a better candidate than others. Have you talked to a bank?0 -
I would hold out, if you can, for more savings and try and see if you can increase your earnings through overtime or getting extra work elsewhere. On top of that 10% deposit you're going to need to fork out for paying solicitors and other professionals, Stamp Duty, home and life insurance, repairs and furnishings (I think you need to have like several grand to hand for this)... My partner and I are aiming to have at least €30k on hand by the time we put down the deposit for a place.2Mad2BeMad wrote: »Hi everyone,
Just wanted to start a discussion thread on the 3.5 rule the banks have and how its affecting you in getting a house. (hoping this thread is ok)
Myself and my partner currently earn 55k a year (gross).
According to AIB using there calculator we can get a loan of €192.500
along with paying 10percent, we can buy a house worth €213,889.
Obviously the calculator is only a guide and I'd expect the approved loan to be even less then that.
We live in Dublin and have lived here all our lives, our family are here,friends and we both work here as well (start of careers)
Now its all well and good in saying " tough **** you can't afford to live here move outside Dublin" But that reply is snobbery, its not a good answer to the problem thousands of people are having.
You can't buy a house in Dublin for 213k, or at least one that does not need a considerable amount of investment to make it livable.
So there is 2 options, increase the rules from 3.5 to 4.5/5
or House prices need to fall dramatically( which in turn creates a whole host of other problems)
We looked at houses near the commuter belt and all seem reasonable we are still priced out of them though, some are just about within the price range but if a bid starts happened we will get priced out very quickly.
So we have to move abit futher out again.
Now here is were the main issue is.
If we moved out far for example say Athy, yes it ain't far in terms of going once, but to do it 5 times a week plus traffic in and out would be soul destroying.
I found a house there for 159k for what ever reason its that price, but its obviously well within our lending criteria so we could afford it.
BUT for us to move down there, we would end up having to buy
2 cars (i already own 1 car but would need a new one as current one wouldnt last very long doing the mileage)
insurance x2
tax x2
nct x2
petrol x2
tolls x2
More car maintenance.
The reason for 2 cars is we both work in opposite ends of Dublin.
And thats just the cost of the getting back into Dublin
That cost far outweighs the price of increasing the 3.5 to 4.5/5.
Now I'm not a complete idiot, I also understand why the rules are at the moment set at 3.5 because of the last crisis people borrowed more then they could and the banks were only to willing to let them borrow it.
I'm just looking for a general discussion, if you can afford in Dublin, thats good for you but this problem of people who can't apparently afford to live in Dublin should just pack up and move away is not the answer. There is alot more people who can't buy in Dublin then there is who can buy.
Myself and my partner, currently pay 2k rent a month, and have done for the past 2 years and likely to continue paying it for the next 2 years.
We could easily afford a mortage of 300k, which would give us at least some options in Dublin. Not to mention the price of the mortage a month would mean we would be saving money every month because it wont be a 2k mortage, it would most likely be less then 1500 a month.
I think the rules need to be changed, and its not only to suit me but to suit alot of people.
It can't just be a 3.5 and thats it, there has to more to look into then that.
This is only for discussion and to rant (slight rant) over the rules.
I'm sure there is some very valid points as to why it can't be increased but I can only see it from my perspective as well as the perspective of other low income workers.
I mean Guarda,nurses all essential workers that keep people in this country safe can't afford a mortage. (not comparing my work to theres they are far more important but being able to compare my wage to a guarda is quite bad on there end)
I don't wish to leave Dublin, It would end up costing me more to live outside Dublin then to live in.
It's a terrible market to be going into right now. I think in a years time property value is going to absolutely plummet, due to the lack of buying and selling in the next year. I'd hang on if I were you, you might get one of the Airbnb gaf's when all their owners finally get their comeuppance.0 -
Is 'working class' even a thing any more?
If the OP is:
> On ~€27.5k;
> With a second income coming into the household;
> At the start of their career;
> Is able to afford to live in a €2k pm residence;
I'd say they're doing pretty well for themselves.
The issue isn't the bank's lending criteria (which largely comes from the CBI anyway), it's the house prices. The house prices are ridiculous due to lack of supply.
Relaxing lending criteria will only flood the market with more buyers, raise prices further, and increase the risk of default. Banks will suffer huge losses and be forced to sell people's homes. Then everyone will ask 'Why aren't the banks helping people?'. Banks aren't charities - they're businesses with a duty of care towards the customers they provide services to. It's not their job to make sure people get housing, it's their job to make sure that they only lend to people that they're sure can afford it.0 -
true-or-false wrote: »Is 'working class' even a thing any more?
If the OP is:
> On ~€27.5k;
> With a second income coming into the household;
> At the start of their career;
> Is able to afford to live in a €2k pm residence;
I'd say they're doing pretty well for themselves.
The issue isn't the bank's lending criteria (which largely comes from the CBI anyway), it's the house prices. The house prices are ridiculous due to lack of supply.
Relaxing lending criteria will only flood the market with more buyers, raise prices further, and increase the risk of default. Banks will suffer huge losses and be forced to sell people's homes. Then everyone will ask 'Why aren't the banks helping people?'. Banks aren't charities - they're businesses with a duty of care towards the customers they provide services to. It's not their job to make sure people get housing, it's their job to make sure that they only lend to people that they're sure can afford it.
But if the OP can afford 2 grand a month rent for the last few years surely they can afford €1200 a month mortgage repayments. Even if that loan is 4 times their income?
Surely a stress test is enough, why does it have to be capped at 3.5?
I understand house prices will go up but they are up anyway.. how do u lower them?
I’m not just talking one or two people here, everyone on under €35,000 per year! That’s a lot of people,some paying well over what a mortgage repayment would be.0 -
Donald Trump wrote: »Think of it this way. Suppose yourself and Pat both want a house. There are only two bidders at the auction and it has just been put on the market by the auctioneer at 200k.
You can pay 260k for it (mixture of mortgage and deposit/savings). Pat only has access to 250k.
Then you pay 251k for the house.
Now suppose, before the auction, Pat's Bank increase his approval to 290k. But they increased for everyone and so now you can spend 300k.
Now you pay 291k for the house.
Giving you both more credit just made the previous owner wealthier.
I get that the house price will go up.
My point is,
At the moment Pat can borrow 3.5 x €75,000= €245,000 + deposit €25,000
Total 270,000
Cheapest house where Pat lives is €285,000
€75,000 x 4 = €300,00 + deposit €25,000
Pat now has €325,000
That house was €285,000 and because more people can afford it it sells (to Pat) for €310,000
Pat pays €2000 per month rent for the last 5 years, his repayments are now €1300 per month. Pat realises he paid more than the asking but feels it’s worth it.
So there is a chance if the current rules are changed that Pat could buy a house where he’s from.
If they are not changed Pat can not buy the house.
I do realise I’m looking at this quite selfishly but there’s a lot more people than me this affects.
Alternatively, just drop house prices.......!0 -
It has to be capped at 3.5 because most people see the amount they can borrow as a target rather than a maximum. If it was lifted to 4.5 or 5 then we would have most FTBs borrowing those ratios.
It is in the public good that people borrow realistic ratios of their income. It is also in the public good that people start with equity in their house (ideally you wouldn’t be able to be gifted the 10%, but I digress). Our housing market has structural issues that require difficult solutions. Raising the lending cap just creates deeper potential problems, while forcing prices up across the board via additional debt. There is no justification for it from a societal perspective. It also won’t solve the “dilemma” faced by the OP.
The OP needs to explain why a two bed terrace or a less expensive area isn’t suitable for his purposes imo.0 -
I get that the house price will go up.
My point is,
At the moment Pat can borrow 3.5 x €75,000= €245,000 + deposit €25,000
Total 270,000
Cheapest house where Pat lives is €285,000
€75,000 x 4 = €300,00 + deposit €25,000
Pat now has €325,000
That house was €285,000 and because more people can afford it it sells (to Pat) for €310,000
But what actually happens is the house sells for about €330K and Pat still can't afford it.
What you don't seem to fully understand is that everyone is in the same boat. There are 100 houses to sell and 101 couples looking to buy, all things being equal the couple on the lowest income will be the ones who can't buy a house.
Looking at income mulitpliers, CB rules etc won't change the fact that the couple with the lowest income will always struggle to buy when there is a shortage of houses because they will be outbid on each and every house by couple who earn more.
Quite simply Pat needs to earn more or hope that demands falls to the point that there are more houses than couples.0 -
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LuckyLloyd wrote: »It has to be capped at 3.5 because most people see the amount they can borrow as a target rather than a maximum. If it was lifted to 4.5 or 5 then we would have most FTBs borrowing those ratios.
It is in the public good that people borrow realistic ratios of their income. It is also in the public good that people start with equity in their house (ideally you wouldn’t be able to be gifted the 10%, but I digress). Our housing market has structural issues that require difficult solutions. Raising the lending cap just creates deeper potential problems, while forcing prices up across the board via additional debt. There is no justification for it from a societal perspective. It also won’t solve the “dilemma” faced by the OP.
The OP needs to explain why a two bed terrace or a less expensive area isn’t suitable for his purposes imo.
So how do you bring house prices down? Build more houses? Is there any other way?
This is about more than the OP, I mentioned before. Bar workers, hairdressers, barbers, factory Ops, Quality Control, cashiers, laundry workers, cleaners, warehouse staff, even assistant managers in most places I worked are on less than €40,000 per year.
Most of these people can easily afford a loan of 4 times their income, Some pay a lot more in rent..0
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