From 100% to 120%

MorningStar

http://breakingnews.iol.ie/news/story.asp?j=150774772&p=y5x775478

IFSRA ‘would not oppose 120% mortgages’
27/07/2005 - 07:29:06

The financial regulator has reportedly said that it would not oppose a move to introduce mortgages of up to 120% in the Irish market.

A number of financial institutions have attracted criticism from several quarters in recent days due to plans to introduce 100% mortgages.

The products are being introduced at a time when soaring personal debt is leading to concerns among many experts.

However, reports this morning said the Irish Financial Services Regulator had indicated that it would not block moves to bring in 120% mortgages, even though it described such products as "irresponsible".



I can't see aybody but the desperate and stupid taking on this risk. Way to reliant on an increasing market,

bill_ashmount

I'll take two please...

jhegarty

MorningStar wrote:

http://breakingnews.iol.ie/news/story.asp?j=150774772&p=y5x775478

IFSRA ‘would not oppose 120% mortgages’
27/07/2005 - 07:29:06

The financial regulator has reportedly said that it would not oppose a move to introduce mortgages of up to 120% in the Irish market.

A number of financial institutions have attracted criticism from several quarters in recent days due to plans to introduce 100% mortgages.

The products are being introduced at a time when soaring personal debt is leading to concerns among many experts.

However, reports this morning said the Irish Financial Services Regulator had indicated that it would not block moves to bring in 120% mortgages, even though it described such products as "irresponsible".



I can't see aybody but the desperate and stupid taking on this risk. Way to reliant on an increasing market,

is a bank talking about offering 120%... that is madness... 100% is good for those stuck in the rental trap , 120% is just mad....

Thomond Pk

So we have a financial regulator who in their own words will not regulate against irresponsible products.

What exactly do they do in IFSRA?

MorningStar

jhegarty wrote:

is a bank talking about offering 120%... that is madness... 100% is good for those stuck in the rental trap , 120% is just mad....

THe madness you think is involved for 120% is that felt by those critical of 100%. We now fell pure insanity at 120%. :eek: :rolleyes: I am so glad I am not starting out.

Mike_Hunt

Its about time consumers started seeing some tangible benefits of healthy competition.

Thomond Pk

The only way to deliver value is to deliver the leanest rates; by increasing the Loan to Value ratios the lenders must pay more for the finance they receive to hand down. Higher LTV's will equal higher rates paid by the borrower to reflect the higher level of risk faced by both the lending institution and the bond issuer that they source funds from.

Mailman

100% and 120% mortgages will only be of benefit to consumers when supply is more in line with demand until then it will only help to keep prices up and leave houses priced beyond the reach of potential purchasers.

SkepticOne

Funny thing for a financial regulator to be coming out with. I mean they might well approve such a product if one appeared but announcing it in advance seems a bit odd.

Victor

And this is where the market starts running away. The more you borrow and pay for a property, the more extra "cash" they will give you.

Time to cut mortgage interest relief.

Thomond Pk

It would be a perfect counter balance to 100% mortgages and would I expect at least moderate growth significantly; but it will never happen this close to an election and from a government PR point of veiw if it all goes pear shaped the government can blame the banks.

The fact that there is no leadership in one of the few monetary management areas we have left speaks volumes, I have often noted Alan Greenspan urging action by local regulators in particular regional housing markets in the US anytime there was even a blip on the radar.

MorningStar

SkepticOne wrote:

Funny thing for a financial regulator to be coming out with. I mean they might well approve such a product if one appeared but announcing it in advance seems a bit odd.

That is an odd comment. They heard one is about to come out and they said it is a bad idea but they aren't going to do anything. They don't have to approve it as there is no requirement to.

I don't think anybody thinks this is a good idea ever let alone in our current environment.

Gurgle

MorningStar wrote:

I don't think anybody thinks this is a good idea ever let alone in our current environment.

You is wrong, I think its a good idea.

When you buy a house, there huge expenses involved along with the actual purchase price.

Very very few people can save the €30k - €60k to cover deposit, stamp duty, legal costs, furnishing the place etc.

Practically everyone borrows it from credit unions etc, at interest rates of 8% to 22% compared to a mortgage at 3% to 5%.

Result is for the first few years after buying your absolutely screwed to the wall with repayments and flat broke. By this stage the house has gone up in value and you can re-mortgage (paying various fees all over again) and dump your additional debts into the mortgage.

120% mortgage, used sensibly, can save you years of pain and thousands of €€€.

Of course there will be twats who borrow 120% and take a world cruise with the 20%. They're stupid and would have found a way to drown in debt with or without a 120% mortgage.

MorningStar

Gurgle wrote:

You is wrong, I think its a good idea.

You are right. I sould have said anybody with an understanding of economics and personal finance would think this is wrong in the long term.

Putting debit on to your mortgage actually costs more in the long run if you don't know what you are doing. From comments made here I am pretty sure many people don't know what they are doing.

People will take out 120% not just for fees but also to buy appliances, furniture etc... The minute you buy certain things they devalue like appliances and furniture. Effectively you end up in negative equity the minute you buy the house and any down turn throws you into major loss.

When you say practicly everybody takes out loans now you might be missing something. First time buyers might be doing that now but it is only a recent phenomenon so the majority of people may not behaving this way IMHO.

One big difference is people are moving into places and buying everything they want and not need. I remember people only having one room carpeted and not having things like washing machines when they bought their houses. There is a change in the mind set that credit isn't bad and saving is too much hassle. The SSIAs were meant to help but it looks like they are going to make things worse for those who don't save.

Mailman

A mortgage of 25 years or more should not be use to purchase fixtures and fittings or any other item that doesn't have a life of in excess of the term of the loan. No business would countenance financing items with a short life with long term finance.

Gurgle

MorningStar wrote:

When you say practicly everybody takes out loans now you might be missing something. First time buyers might be doing that now but it is only a recent phenomenon so the majority of people may not behaving this way IMHO.

Yes, recent as in since the price of houses started shooting up in the mid 90s.

MorningStar wrote:

I remember people only having one room carpeted and not having things like washing machines when they bought their houses

Me, 6 years ago, new house with no stamp duty and I was still in debt to the tune of about 102% of the house value by the time I turned the key.

- With a 92% mortgage @ 4.7% and a CU loan for the other 10% @ ~10%.

There is a lot more to be spent when buying a house than the purchase price of the house.

And of course I'm talking about first time buyers, people trading up have equity in their previous property. (Duh!)

Every first time buyer starts in negative equity, unless they have rich parents. If you have rich parents who helped you buy your house, you're not qualified to preach at the rest of us about our financial arrangements.

A bigger mortgage at lower interest rate is better than an extra loan at higher interest rate.

Saving €30-€60k over any reasonable time while paying rent & living isn't 'too much hassle' its impossible.

This obviously doesn't apply to your average Dub who lives at home with his mammy until hes 35.

MorningStar

Gurgle wrote:

Yes, recent as in since the price of houses started shooting up in the mid 90s.

The odd few people were doing this in the early days now it appears to be the norm. All the people I know who bought in the 90 were using the traditional 80%-90%

Gurgle wrote:

Me, 6 years ago, new house with no stamp duty and I was still in debt to the tune of about 102% of the house value by the time I turned the key.

- With a 92% mortgage @ 4.7% and a CU loan for the other 10% @ ~10%.

There is a lot more to be spent when buying a house than the purchase price of the house.

Every first time buyer starts in negative equity, unless they have rich parents. If you have rich parents who helped you buy your house, you're not qualified to preach at the rest of us about our financial arrangements.

That means you didn't save any money to buy your house! That is the kind of thing that pushes up house prices and actually makes the market unstable.

Not every FTB starts in negative equity and it is a very recent (last 5 years) thing that they do now. I am not preaching about how you do your finance it is the effect it has on others. I just want the government to make sure the market doesn't fall apart. Just because you want to put yourself at risk doesn't give you the right to put others at risk. If something happens the people who don't get screwed will probably have to some how bail out people who do mess up. A bad idea is a bad idea it doesn't matter how I got where I am by allowing people to take huge risks you force others to do the same to stay in the market. You then end up in this situation where people think it is normal and not risky behaviour.

homeOwner

Gurgle wrote:

This obviously doesn't apply to your average Dub who lives at home with his mammy until hes 35.

Ahem, thats a bit of a generalization. I'm a dub and dont know any of my dub friends or work collegues living at home with their "mammies" in their 30s.
Are you saying that this is typical of people from Dublin?? :mad:

kkposse

I'd have 2 agree with gurgle on both points!

Gurgle

MorningStar wrote:

That means you didn't save any money to buy your house!

Thats right, 10 months after I finished college I borrowed the £2k booking deposit to buy a house off the plans.

I could have saved the deposit over the last 6 years (while paying more in rent than I have been paying in mortgage), then bought the same house second hand for slightly more than double the price I did pay.

And following the MorningStar personal finance advice, that would have been the right way to do it. :rolleyes:

MorningStar wrote:

That is the kind of thing that pushes up house prices and actually makes the market unstable.

Now lets be absolutely clear here;
There is one factor which has driven up house prices: The systematically corrupt approach to planning taken at every level from local UDCs to Dail Eireann.

MorningStar wrote:

Not every FTB starts in negative equity and it is a very recent (last 5 years) thing that they do now.

They do now. We're talking about now. Now is the time that is happening now. Right now. This is the same time that the subject of 120% mortgages is coming up. (now)

MorningStar wrote:

I just want the government to make sure the market doesn't fall apart.

Government is always going to carefully protect the interests of its sponsors.

Don't get me wrong, if they start handing 120% mortgages out to anyone who wants one, then a whole lot of people are going to burn themselves. My point is that 120% is not an unreasonable cap in the current housing climate.

CiaranC

A bad idea is a bad idea it doesn't matter how I got where I am by allowing people to take huge risks you force others to do the same to stay in the market. You then end up in this situation where people think it is normal and not risky behaviour.

Are you suggesting people should stay at home, or throw tens of thousands of euro away into the rental sector simply to protect the abstract 'market'?

People do what they do because they have no alternative. Show me the way into the market that protects it and doesnt mean me living at home till im 40, and Ill gladly do it. Until then, Ill take the only course open to me. If that damages the market, then so be it. I need somewhere to live.

homeOwner

kkposse wrote:

I'd have 2 agree with gurgle on both points!

Why? If you are going to post opinions that p1ss people off, at least back them up with some facts. I am guessing you arent from Dublin yourself.

Have you considered that people from dublin are at a disadvantage in that if they want to settle down near where they grew up and where their friends and family are, chances are they cant afford to. Contrast this with someone from say Wexford (I am just picking that as an example) where you can buy a 3 or 4 bed house for the same price as a 2 bed apartment in Dublin. That person can chose to settle down with family, kids near their parents or where they grew up and are not prohibited from doing so because of financial reasons to the same extent as someone from Dublin is. I would venture that someone in their 30s living at home in Dublin is not doing so out of choice, but because they cant afford to buy somewhere in dublin.

Gurgle

homeOwner wrote:

Ahem, thats a bit of a generalization.

No, its a gross generalization.

But it is more common in Dublin than elsewhere precisely because the housing market is so unbelievably expensive. You could be born & reared in Rathfarnam and the nearest house you could possibly afford is in Drogheda.

Imposter

MorningStar wrote:

I am not preaching about how you do your finance it is the effect it has on others. I just want the government to make sure the market doesn't fall apart. Just because you want to put yourself at risk doesn't give you the right to put others at risk.

To repeat myself: You want the governemnt to protect your property because you are happy with where the market is at the moment (in terms of the value of your property to you). The 'market' is a risk. If you don't like something that's happening in the market, then get out of it but don't preach to others about damaging your risk or start whinging that the government should protect your investment.

I think a 120% mortgage is very dangerous but as people have pointed out it will mean that people who cannot save for the deposit can consolidate all loans with a lower interest rate. At the end of the day, whether it's a good idea or not is up to the person availing of the loan as well as the financial institution granting the loan to decide.

thatkindofgirl

Homeowner -
Dublin homes may be more expensive, but people who live in them have more access to jobs, to make the money to buy the homes.

People who live in Wexford don't have the same access to jobs, and houses are cheaper.

It's pretty simple and it's not unfair.

homeOwner

thatkindofgirl wrote:

Homeowner -
Dublin homes may be more expensive, but people who live in them have more access to jobs, to make the money to buy the homes.

People who live in Wexford don't have the same access to jobs, and houses are cheaper.

It's pretty simple and it's not unfair.

Yes but people in Wexford can buy a decent house there, rent it out and then rent in Dublin (I know people doing this) and work for 10 years or so and then settle down in Wexford with the kids and get a job somewhere commutable. Dublin people dont have the choice of doing this - maybe more access to jobs but no chance of getting out of rat race.
I am not saying its fair or unfair, I am merely saying that people in their 30s dont GENERALLY choose to live at home with parents if they have any other reasonable choice.

garred

I think its a good idea. As I have said before, give the borrower some credit/inteligence. They will always work out, no matter how big the loan is, what they can afford to pay back. Simple. A lender is not going to give someone a 120% mortgage if they can't pay it back. I know some people fiddle p50/payslips etc to get loans but they also know they can afford the repayments.

MorningStar

Imposter wrote:

To repeat myself: You want the governemnt to protect your property because you are happy with where the market is at the moment (in terms of the value of your property to you). The 'market' is a risk. If you don't like something that's happening in the market, then get out of it but don't preach to others about damaging your risk or start whinging that the government should protect your investment.

I don't know what your problem is with me. I didn't say that and last time I replied to you, you just ignored any point.
I won't be effected in anyway unless the market crashes 80-90%. I am concerned about the people joining the market. Not MY property. I actually have a socal consicience and am used to what happens. If something devistating happens I will effect EVERYONE. I don't like to see people have to work two jobs and spend all their time traveling to work. You went on about quality of life before but don't have any idea what it was like in the 80s and how what is being allowed to happen could make that happen again or worse.

Gurgle wrote:

Now lets be absolutely clear here;
There is one factor which has driven up house prices: The systematically corrupt approach to planning taken at every level from local UDCs to Dail Eireann.

Actually it's the revesre vampires from space who control them that is the problem. :rolleyes: It's a large house buying population and too few houses. Nobody knew ireland was going to suddenly boom. The government have done a huge amount to encourage building and still are. If you think the government are organised enough systmatically screw people over on house prices you give them a lot more credit than I would.

CiranC wrote:

Are you suggesting people should stay at home, or throw tens of thousands of euro away into the rental sector simply to protect the abstract 'market'?

Far from it I am suggest the government restrict the amounts for mortgages, if people can't get the money house prices can't go up, it's that simple. I can't buy something for a €120 if I only have €100 prices can't go up if people don't have the money to pay extra! I don't want to see people in massive debit so my equity increases. I'd actually benifit further if house prices go up.
In saying that 120% this year aren't a huge mistake if they are based on maturing SSIAs next year. It could be a clever move as it looks likely the house prices will rise next year when they mature.

delly

Gurgle wrote:

Practically everyone borrows it from credit unions etc, at interest rates of 8% to 22% compared to a mortgage at 3% to 5%.

'Credit Unions - helping people hide loans from mortgage lenders for countless years '

MorningStar

thatkindofgirl wrote:

Homeowner -
Dublin homes may be more expensive, but people who live in them have more access to jobs, to make the money to buy the homes.

People who live in Wexford don't have the same access to jobs, and houses are cheaper.

It's pretty simple and it's not unfair.

Well that's not quite fair. Many civil servants get paid the same no matter where they live! If you are from Dublin it is very hard to stay here due to cost. You can't have a low paying job and start on the property ladder in Dublin without state aid. You can do that in the country. Dublin isn't just a city where people work it is our home and family.
Wexford stops people from outside Wexford buying houses yet we can't do that here. That actually limits the Wexford house prices.

CiaranC

MorningStar wrote:

Far from it I am suggest the government restrict the amounts for mortgages, if people can't get the money house prices can't go up, it's that simple.

I see your point, but I think you underestimate the lenghts people will go to to buy a place to live.