Softening house market?

AdamD

https://www.boards.ie/discussion/comment/119763030#Comment_119763030

Nothing is going to move that quickly. Anyone wanting to take advantage of this would need to reapply for mortgage approval. Highly doubt this would affect current sales

Bass Reeves

We had the most conservative borrowing rules for mortgage lending in Ireland. Guess what we still have. The CB has been reviewing this for the last 10-12 months. The previous standard was 3.5 times income. However fir a lot of buyers they were depending on the exception's at the start of the year that were allowed at 4.5 times.

I do not think it will change prices to much. It will be an advantage to single buyers who wish to buy lower priced property.

For a person on the average industrial wage of 50k it will give them another 25k. With the HTB and a deposit it will allow the to purchase at the 250k bracket. Repayments @3% would being the 1250/month.

It will also prevent some of the panic of trying to complete contracts early in the year to achieve an over 3.5 times loan. However loan repayment would be slightly less than 40% of take home pay which is a slight worry.

It will make a big difference to those couples paying significant rent in the 80-100k total income who may be squeezed out of buying

Yurt2

The rationale will be interesting to listen to when this is announced. The Central Bank has a responsibility to the wellbeing of the economy as a whole and not sweetheart sectors.

Depressingly, the construction and ancillary property related services (insurance, real estate management, auctioneers, quantity surveyors you could go on and on) sector is of such an oversized part of the economy, that they feel like they have to feed the beast so everyone can get their cut. As a few posters have intimated, this isn't particularly good news for first time buyers who may have spent the last few years cobbling together a deposit.

I hope they provide a firm, credible rationale to back the decision. As my secondary maths teacher hammered into us: "I'm not interested in the answer, show me your workings."

awec

https://www.boards.ie/discussion/comment/119763032#Comment_119763032

I hate to break it to you @Cllr_Dermod_Fahy , but if you do the sums for anyone who has bought since the lending rules came in, you will struggle to find many, if any people, paying more than about 30% of their income on the mortgage. Many will pay less. This is what the lending rules enforce, paying 50% of your income on the mortgage is not going to happen.

We hear a lot on here about how property is "overvalued", but unfortunately all too often people think houses are overvalued purely because they're more expensive than they want them to be. Prices are high right now, unquestionably so, but "overvalued" really doesn't mean anything.

If you think 1k a month on the mortgage is shocking for an apartment, I suggest you avoid looking at rent prices for similar properties, as you might just fall off your chair.

Yurt2

https://www.boards.ie/discussion/comment/119763197#Comment_119763197

Rather the point, this will negatively effect people on fixed incomes that were priming themselves to buy their first homes on the lower end of the market. Single people particularly, who have an extremely hard time of it as is.

Political reaction to this will be worth watching. FF were the frontrunners in pushing for a softening of the rules. They best have their story straight if house prices accelerate off the back of it.

Yurt2

https://www.boards.ie/discussion/comment/119763182#Comment_119763182

If house prices go up to match the lending rules loosening, and there's every chance that it will, the net effect will be first time buyers taking on more debt, and those on the margins (again I'm thinking of single people) failing stress tests.

So this is really of fanny all use to people buying their first home at best, and will accelerate house price inflation putting them back another few years at worst.

awec

https://www.boards.ie/discussion/comment/119763218#Comment_119763218

Yes it will affect the lower end more as I suspect they will be limited by the banks own rules, and the 4x rate will realistically only be available to higher earners.

Donald Trump

Will it be the 2020's version of the 100% mortgage from the mid-late 2000's?

FrStone

https://www.boards.ie/discussion/comment/119762007#Comment_119762007

We will do anything to keep house prices artificially high.

IWW2900

https://www.boards.ie/discussion/comment/119763296#Comment_119763296

Investors and funds dont care about a 4x multiple. They are already selling. Shameful policy to squeeze the average joe to the max and leave them holding massive debt with a house worth a fraction of what they spent.

Hilarious decision though, you couldnt make up the stupidity of the government decisions...unless you realize they aint making decisions for the common man.

Yurt2

https://www.boards.ie/discussion/comment/119763306#Comment_119763306

In fairness, the Central Bank make decisions independent of government. Although there has been pressure from government via the media for them to loosen the rules.

Political reaction to this will be interesting to watch, and the Central Bank's statement will be too.

triddles

https://www.boards.ie/discussion/comment/119762361#Comment_119762361

Hopefully ya get sorted.

Yurt2

https://www.boards.ie/discussion/comment/119763323#Comment_119763323

And more of his/her income will be going on a mortgage repayment for the next few decades at the stroke of a pen for reason only known to the Central Bank. And that's if all goes well. Probably competing for lower quality housing stock also. Not good news.

This is a direct transfer to those to developers taking a fatter margin on new builds, those already who own property, and ulimately the banking sector.

MrMusician18

https://www.boards.ie/discussion/comment/119763233#Comment_119763233

It's of absolutely no use to any purchaser because more credit is available to all - it doesn't give anyone an edge. That was the idea with 4.5x exemptions - those would have an edge over the rest of the market.

Giving everyone access to more money only benefits vendors. It doesn't address competition in the market and tbh it's unlikely to increase new build supply (which is really what this measure is seemingly meant to do). It is akin to pouring petrol on the market and is utterly reckless of our CB.

All it will ensure is that those in the 50-70 cohort get fatter inheritances, developers make more profit, the property merry go round with associated hangers on keeps turning and that those seeking a family home and stability carry even more debt.

Yurt2

https://www.boards.ie/discussion/comment/119763337#Comment_119763337

The only rationale is that it might increase supply, but the mechanism they're using to do it is to directly dip into the pockets of first-time-buyers and people trading up to their second home.

The construction sector is at full-capacity in any case, difficult to see how this could really increase supply.

MrMusician18

https://www.boards.ie/discussion/comment/119763357#Comment_119763357

I fully agree. It won't work and it can't work because it's increasing lending to chase inflation.

The CBs big idea is that because wages aren't keeping pace with building inflation we have to allow borrowers to borrow more so that builders can afford to build houses and sell at a profit. But building construction inflation is showing no signs of slowing and we have a concrete levy coming, so what happens 12 months down the line when builders complain of the same issues again? Will the CB display the same imagination and just allow more money to flood the market?

The point that they draw the line will be the point the bubble bursts.

This sh*tshow is only starting. Unless one absolutely has to and has no other choice, why would you buy a house now. You'll have even more negative equity to look forward to. Mortgage applications have been way down the last few months. Is that because of affordability issues? I'm not so sure, people have copped on and know things are about to change. This shouldn't change anyones decision to hold off buying. People had lost faith in the market and I can't see why this decision would entice someone to buy a house. Taking on more debt at higher interest rates. Waiting for the replies, people need to move on with their life etc, blah blah blah.

https://www.boards.ie/discussion/comment/119763375#Comment_119763375

This might sound mad, but this actually could lead to more houses being built as the spoilt developers will feel they will be able to charge higher prices. I really hope anyone that can hold off buying does, don't buy in this trap the government and developers are setting.

Cyrus

https://www.boards.ie/discussion/comment/119763553#Comment_119763553

But people do have lives to live , if you are an investor sure wait it out, if you have a family and need your own home then you may not have a choice.

as I’ve said before people have been saying similar for the past 5 or 6 years, we are still waiting on the predicted sh1tshow as you call it. It’s closer now than it was then but it probably won’t take the form you expect anyway.

https://www.boards.ie/discussion/comment/119763565#Comment_119763565

As I said if people need to buy then go ahead. Take on even more debt at higher interest rates, we'll see how well living their life goes then. Unless one is about to be made homeless, and can afford to pay these crazy prices then I'd hold off.

Cyrus

https://www.boards.ie/discussion/comment/119763570#Comment_119763570

The alternative is pay higher rent in most cases and have no security of accommodation, the benefits to owning your own home are more than a solely financial decision, it’s like having kids if you ran the numbers no one would do it!

anyway your point remains but people have been making that point for some time now, could be waiting a while to tell everyone I told you so:

Cllr_Dermod_Fahy

https://www.boards.ie/discussion/comment/119763182#Comment_119763182

Can you please tell me where, a new build can be bought for 250k? And if you do find me somewhere new costing 250k, please let me know if people can expect to earn 50k there.

For a person on the average industrial wage of 50k it will give them another 25k. With the HTB and a deposit it will allow the to purchase at the 250k bracket. Repayments @3% would being the 1250/month.

Conservative borrowing rules or not, it doesn't change the number of houses being built. Houses are still being bought by first time buyers.

It will make a big difference to those couples paying significant rent in the 80-100k total income who may be squeezed out of buying

And also in response to this, how does this help? There aren't any extra houses built because of this rule change. So a couple combined earnings of 100k will now get a mortgage for 400k rather than 350k. So let's say a house costing 440k now. A couple currently on 115k combined salary can buy that house. So loosening the rules does allow the 100k couple to now buy, but it just means that the couple earning 115k have competition now and can be left without. Houses are currently being bought by first time buyers. If houses were left unsold then yeah, expanding the limit would make sense but there isn't.

Cllr_Dermod_Fahy

https://www.boards.ie/discussion/comment/119763559#Comment_119763559

We have heard this over and over again, that giving developers more money will make them build more houses. The reason government brought in the help to buy was to push prices up to improve margins for them. Then they upped it to 30k. Guess what, builders are still planning on cutting back so they can still charge insane prices. All this talk of not being profitable for builders yet wait and you see, builders will be posting record profits next year.

AySeeDoubleYeh

https://www.boards.ie/discussion/comment/119763565#Comment_119763565

Unfortunately, this is absolutely the case. You just need to look at home ownership rates for 40s and under in this country. Lots of families looking to buy, and plenty more putting family on hold until they can secure a property.

AySeeDoubleYeh

Also, to those trying to spin this, take a look at yourselves. It shouldn't be difficult to acknowledge how this impacts the population - including those who will benefit from it.

https://www.boards.ie/discussion/comment/119763692#Comment_119763692

I didnt know you couldn't start a family while renting?

https://www.boards.ie/discussion/comment/119763646#Comment_119763646

I posted about these record profits just on Monday........

thomas 123

Anyone know when the 4x comes into effect?

AySeeDoubleYeh

https://www.boards.ie/discussion/comment/119763709#Comment_119763709

What type of properties do you think they're renting? And - even those who are prepared and willing to rent - what availability is there? And what is the cost?

Padre_Pio

https://www.boards.ie/discussion/comment/119763709#Comment_119763709

You can, but many people don't like the idea of having children in insecure accommodation. A lot of couples don't live together until they buy, since the cost of co-renting with a partner is absurd.

You may notice that a lot of people tend to buy a house, get married, and have a baby all in a very short amount of time.