Irish Property Market chat II - *read mod note post #1 before posting*

MacronvFrugals

https://www.boards.ie/discussion/comment/119796879#Comment_119796879

I'd be more concerned with Phil Hogan hiring him in the first place and filling ABP with FG'ers. Is it a coincidence that since then the whole organization has been a disaster?

jimmybobbyschweiz

https://www.boards.ie/discussion/comment/119797305#Comment_119797305

Need to be the good boys of the EU, down on the knees and tongue out for some of that ECB bread, which is keeping the whole charade going as the country won't run without continued borrowing. Magic Money Tree stuff from FG.

Villa05

https://www.boards.ie/discussion/comment/119796914#Comment_119796914

Fair play to him/her, they know how to get there housing sorted

markodaly

https://www.boards.ie/discussion/comment/119797023#Comment_119797023

Spoke with a mortgage broker today and they said that to qualify for the new x4 LTI one needs to demonstrate that you have the ability to repay back the loan amount plus the interest rate plus the stress test on top. And you have to show that ability over 6 months.

So that may dampen down things a bit as there may not be a wave of new cash chasing homes in the new year.

Example.

Couple on 100k combined

Old rule on older cheaper rates.

350,000 borrowed at 2.1% over 25 years = 1500.59

Stressed tested at an extra 2% = 1866.81

New rule on more expensive rates say 3.5% given ECB are hiking fast

400,000 borrowed at 3.5% over 25 years = 2002.49

Stress tested at an extra 2% = 2456.35

So in effect, you have to be able to demonstrate that you can save/pay the guts of 2.5k per month to borrow the new amount, as opposed to 1.85k when borrowing the lower amount. That is a big jump. To me, it's clear that not every FTB will be able to get the max amount.

theboringfox

David McWilliams podcast today covers housing markets and has the Economist journalist on who wrote recent article on global house price slumps. Good listen.

As other posters rightly point out even if house prices fell due to rate rises people may still be paying dearer mortgage due to rate rises.

All these other markets with falling house prices have the same supply issues as Ireland. It is simply rising rates driving asset prices down. It will be amazing and testament to strength of Irish economy if we avoid falling prices as rates rise (noting rate rises to date have not materially been passed on yet).

wassie

We are definately entering an adjustment period where a lot of current vendors will have price expectations coming out the low interest rate environment which purchasors will no longer be able to meet.

markodaly

https://www.boards.ie/discussion/comment/119798184#Comment_119798184

So the ECB expected to raise rates again today by 75 basis points with the market expecting the ECB to top out about 3%

If the ECB cash rate is 3% then banks are doing well to give mortgages at 5%, in reality it will be nearer 6%

Using my own example above:

400k borrowed over 25 years at 5% = 2338.36 per month

Stress tested at 7% = 2827.12

Remember, the UK have mortgages right now at 6.5% and if we reach the same level we would get

400k borrowed over 25 years at 6.5% = 2700.83 per month

Stressed tested at 8.5% = 3220.91 per month

I don't know many people who can 'save' 3200 a month

I don't think we are talking enough about how these rate rises are going to affect the housing market.

jimmybobbyschweiz

https://www.boards.ie/discussion/comment/119798774#Comment_119798774

It is a necessary correction as once again the housing market in Ireland has lost the run of itself and is causing huge issues with respect to our cost of living; with too much cash getting sucked into property at the expense of the broader economy, including with respect to individuals who have less money to spend on food, heating their home, paying electricity, saving some cash etc.

Houses falling in value and mortgage repayments being higher than when the houses were more valuable; good luck to those who have bought and will buy is all I can say!

timmyntc

https://www.boards.ie/discussion/comment/119799038#Comment_119799038

Irish banks have a higher capital requirement - so a rise in rates also benefits their balance sheet

To date they have been part absorbing the rate increases due to that fact, so is it possible they may keep rates lower than they would be otherwise in other countries (with lower capital reqs)?

Villa05

https://www.boards.ie/discussion/comment/119798184#Comment_119798184

The rule changes were changed to help prevent/reduce the effects of a correction

We spent the last month pointing fingers and having a laugh at the uk, while our central bank has been at the very same thing as kwasi and Truss. Unsustainable policies that go against the overall objective of getting inflation down. One entity with the foot on the accelerator while the other is slamming on the brakes

The same thing was done in the tech bubble burst of the noughties. Lending was loosened and led to the bankruptcy of the country from the 08 crash

This time its different and nobody saw it coming and we all went mad etc etc

Cyrus

https://www.boards.ie/discussion/comment/119798184#Comment_119798184

Yes i think i made that point earlier, regardless of the overarching CB rules the banks have been pretty prudent in lending as well,

so a couple with childcare costs for example my well find it difficult to qualify for the x4 times income.

Eclectic Econometrics

I saw some last minute talk that they may not go as high as fast as this but...

"ECB raises benchmark rate by 0.75 percentage"

https://www.ft.com/content/c46e2f8d-c1c2-4ae1-9d1c-4b5dbf6f7f89

jimmybobbyschweiz

Embarrassing that the narrative barely mentions savers will benefit from the rate rises, instead focusing on mortgage holders only. It just shows how invested in a debt-fuelled economy we are, from the state itself to the individuals. This is where a crash could be pretty bad for so many people.

Villa05

https://www.boards.ie/discussion/comment/119800077#Comment_119800077

No real benefit to savers of the traditional sense, banks won't pass them on to savers

https://www.independent.ie/business/irish/irish-banks-to-make-1bn-killing-on-rate-rises-as-families-suffer-42098053.html

GoldFour4

https://www.boards.ie/discussion/comment/119800077#Comment_119800077

is any bank passing these rates onto customers?

timmyntc

Banks dont tend to pass on savings rates nearly as much.

Add to that how punitive DIRT is, it doesnt really pay to save in this country at all, regardless of ECB rates.

Mortgage repayments is by far the bigger story

flexcon

https://www.boards.ie/discussion/comment/119800077#Comment_119800077

Embarrassing narative? wow I mean, that's a bit hyperbolic right?

Sure with inflation way above 8%, what's 1.5% interest on savings going to do?

Villa05

https://www.boards.ie/discussion/comment/119800410#Comment_119800410

Alot better than cash invested in the stock market for this year

This year and next is about preservation not profit

PommieBast

https://www.boards.ie/discussion/comment/119800410#Comment_119800410

To people like me who consider putting money away for a rainy day to be a virtue, if not a core skill in being able to look after oneself, I would use words a lot stronger than "embarrassing" to describe how saving is now treated. Back in 1999 I took out a 2-year bond that paid 14% interest whereas these days getting that sort of return can only be done via gambling.

jimmybobbyschweiz

https://www.boards.ie/discussion/comment/119800410#Comment_119800410

You can get 3% savings rates if you shop around:

https://www.raisin.ie/savings-accounts/?utm_medium=impact&utm_adid=941071&utm_country=TxU1gRzzXxyNTCY2QoTUYxV0UkDX2eVPeQm-2o0&utm_media=Affiliate/CPA%20Network&irgwc=1&utm_campaign=&utm_source=25852

What's 100-200 a month increase to a mortgage when rents have gone up by approximately half of that amount each month each year for the last decade? It is a storm in a tea cup to try to make such a song and dance about mortgages getting a bit more expensive in the context of house prices continuing to soar and rents increasing by those amounts each year when a mortgage is a long term commitment and stress testing would have ensured these are manageable increases to mortgage repayments.

Inflation will be forced to subside with unfortunately devastating consequences in the coming months and cash will, as always, become valuable in such a situation together with security of shelter and in employment. A couple years of high inflation does not permanently erode the relative value of cash. There will be opportunities for those who want to buy property soon as appetite for purchasing will be muted as the pull back in the economic growth manifests.

awec

https://www.boards.ie/discussion/comment/119800341#Comment_119800341

No, and IMO they are unlikely to do so any time soon.

I am not sure why jimmy thinks savers are benefitting from this.

drogon.

https://www.boards.ie/discussion/comment/119801008#Comment_119801008

Very funny to see how you are so biased in your thinking. No different from the crowd that thinks house prices will crash.

awec

https://www.boards.ie/discussion/comment/119801184#Comment_119801184

What an odd response.

Why do you think banks would raise savings rates? Banks are awash with savings, you think they want to start paying out interest on this? The first bank to raise savings rates to any level above zero is going to be hammered with even more deposits, I doubt there'll be any bank rushing to do that.

Banks don't want more deposits.

drogon.

https://www.boards.ie/discussion/comment/119801221#Comment_119801221

😂 Coming from the man that was harping on that Irish banks won't be raising interest rates quickly as they were awash with cash. Yet here we are banks slowly increasing rates. Won't be long before banks start offering at least some interest rate on savings. Albeit not the ECB rates will be.

I am a home owner too, and I know for a fact IR will go up. This time next year, we will be down two major banks and the lack of completion is going to be terrible in the long run. Can easily see the pay on bankers being removed by next year too and over all more profit for banks.

Villa05

https://www.boards.ie/discussion/comment/119798774#Comment_119798774

His conclusion was apt and suggested here a week ago ish.

Let the crash happen and intervene after its happened, snap up the available labour and land and build affordable rentals. Never let housing be a choke on the economy again. Simple really

The billions paid out annually to private landlords reverts to potentially being income for the state offsetting a possible fall in taxes elsewhere like vat and corporation taxes

Massive opportunity for the state, but like many others over the last decade will be squandered by ffg bailing out there buddies and the greens watching on blindly

awec

https://www.boards.ie/discussion/comment/119801261#Comment_119801261

Er, banks are not raising interest rates quickly? I mean, the ECB have raised rates 2% and so far in Ireland 1 bank has raised rates by 0.5%. Is this your definition of quick? Are you sure you're following along correctly?

I'll ask again, why would banks offer interest on savings right now? What would be the reason?

L1011

https://www.boards.ie/discussion/comment/119800930#Comment_119800930

Did you even click through to that link or just read the headline?

2.55% is the highest it offers, with a bank in Portugal with complicated rules for non-residents; including withholding tax - and then having to declare your interest here too.

For normal savers, its what the Irish banks offer that matters. And 0.01 is about all you'll get, just like when ECB rates were 0.

drogon.

https://www.boards.ie/discussion/comment/119801335#Comment_119801335

First hike was in July and rates went from -.5% -> 0%

Second hike in sept was from 0% -> .75%.

(A month later AIB decided to increase their variable rate by .5%. So technically they are only absorbing .25%)

Third hike (Today) they are increasing it from from .75% -> 1.5%

So technically the interest rate was only positive for a month and a bit now. I would say by end of q1 of next year, we will see some sort of interest rate on savings.

Honestly I also think the days of negative interest rates are long gone, for the next decade we should expect ECB rates to be around the 1.5%

Villa05

Can finance Ireland and the other non bank lenders offer a savings product as they are funding their mortgages from the markets also revolut n26 etc

Jonnyc135

https://www.boards.ie/discussion/comment/119801410#Comment_119801410

If inflation drops back to 0-1% then the ECB will definitely drop rates negative again inorder to use fiancial repression and negative real terms interest rates to water down their total debt.

Somehow I don't see inflation even getting to their target of 2% unless the basket of goods is rejigged, which has a history of happening.