Income Multiple Limits on Mortgages

I heard on Newstalk there something about Enda Kenny intervening to reduce the 20% back down to 10%.

Anyone hear anything about that? Technically can he force the hand of the Central Bank (Whether he's technically allowed to or not I'm sure, this being Ireland, that he'll be able to do so somehow since this could negatively impact the price of houses)?

People were given mortgages with too high LTV.... There was outcry.

The central bank try to put in place a more sensible LTV threshold ..... There is outcry.

FreudianSlippers wrote: »

I think a 10% minimum is fair though. We were talking about 100%+ mortgages before, which is a different kettle of fish.

A tiny fraction of the total mortgage pot were 100% LTV mortgages.

Most mortgages pre-2008 required at least 8-10% deposit.

Returning to that again seems like no solution to anything.

Brussels Sprout wrote: »

I heard on Newstalk there something about Enda Kenny intervening to reduce the 20% back down to 10%.

Anyone hear anything about that? Technically can he force the hand of the Central Bank (Whether he's technically allowed to or not I'm sure, this being Ireland, that he'll be able to do so somehow since this could negatively impact the price of houses)?

As far as I know, there's nothing he can do in a straightforward way to force the Central Bank to back down. The Central Bank is independent, and has power over the banks. If they require banks to take a certain level of deposit, that's prudential regulation, and the job of the Central Bank. After all, this is exactly why you have independent central banks - so that they can do what is unpopular but necessary.

However, he can carry out the intervention he has suggested, which does, or could, have the effect of neutralising the CB's cap - a lot depends on how tight the qualification for government 'mortgage insurance' is.

If it were to be a widespread scheme, then it could remove all the prudential effects of the CB's regulation, directly creating moral hazard and taxpayer liabilities at the banks while propping up inflated house prices.

If it's not a widespread scheme, but instead a tightly controlled one, then it's essentially a political fix, which allows house prices to fall as per the CB's intention, but avoids blame for having "done nothing to help the deserving".

I'm hoping for the latter - a narrow scheme is as politically clever as a broad scheme is economically stupid.

cordially,
Scofflaw

I'm shocked that people still think 20% is too high.

If you find it a struggle to gather together 20% of the price of a property, you most likely are going to struggle to pay the other 80%!!!

To take an example.
5% payment on 20 year mortgage on 80% of the value of a house = X
If you save X for three years (and two months) you will have your 20% deposit.

If you can't manage to save X for 38 months then you probably aren't in a position to get a mortgage.

stevedublin wrote: »

Your calculation ignores the fact that those in rented accomodation will not be paying rent anymore if they buy their own property.

Fair point.
I concede it ruins my entire argument but I stand by my overall point. If you can't easily get to 20%, you will struggle to pay off the rest.

draiochtanois wrote: »

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Where in Dublin ( or anywhere else ) do you put more accommodation where people want to live, proper planning while a good thing in its self will not make more development land available if it not physically there in the first place.

Charlie Weston beating the usual Indo pro-increasing property prices drum:

So enter some brainy people in the Government with a scheme that does not in any way undermine the job of Dr Honohan in protecting the banks from themselves and avoiding us having to rescue them again.

The Government will put in place an insurance scheme to guarantee 10pc of the value of the property being mortgaged.

New buyers will have to come up with a 10pc deposit, less onerous than the 20pc one.

But the banks will be protected up to 20pc of the property's value - half of this will be covered with the deposit and the other half from the mortgage insurance.

The only downside is that buyers will have to pay a small premium for the insurance.

It is a stroke, if not a master stroke, that gets everyone out of a fix.

He completely ignores the fact that in the case of a default the government is on the hook for 10% of the original house value.

link

Brussels Sprout wrote: »

Charlie Weston beating the usual Indo pro-increasing property prices drum:

So enter some brainy people in the Government with a scheme that does not in any way undermine the job of Dr Honohan in protecting the banks from themselves and avoiding us having to rescue them again.

The Government will put in place an insurance scheme to guarantee 10pc of the value of the property being mortgaged.

New buyers will have to come up with a 10pc deposit, less onerous than the 20pc one.

But the banks will be protected up to 20pc of the property's value - half of this will be covered with the deposit and the other half from the mortgage insurance.

The only downside is that buyers will have to pay a small premium for the insurance.

It is a stroke, if not a master stroke, that gets everyone out of a fix.

He completely ignores the fact that in the case of a default the government is on the hook for 10% of the original house value.

link

I presume that the idea is that the insurance premium covers the risk in the case of default (thus adding to the total mortgage repayment, which will now be 90% + interest + premium). Thus the government also bears no risk....but, wait...why is the government involved?

If this is a perfectly sensible arrangement, where the premiums cover the risk, then why not have it done by private insurance companies? Surely it's not because the premium won't really cover the risk? Oh dear.

And that's assuming that both the banks and the government have a good handle on the risk involved. Let's turn, therefore, to their track record on property-finance risk assessment. Oh dear again.

This is a fine example of "populism" - doing what sounds popular, even though it is almost certainly a bad idea, or would be if it worked.

cordially,
Scofflaw

Larry Wildman wrote: »

No, it's an example of the State actually doing something for its people.

People who contribute to society...people who ARE society rather than freeloaders and gobsh1tes.

In many cases there are couples who are paying high rents, childcare costs and the austerity taxes and managing to save a deposit for their own home. Telling that person that at the stroke of some fat cat civil servant's pen, it'll tale them 8 years instead of 4 to put together their deposit is devastating.

I rarely say this - Fair play to Enda Kenny.

Event thought I agree with increased deposits your post has kind of convinced me ... It is not fair on a lot of couples. it is one of those issues that is very had to get right though.

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FreudianSlippers wrote: »

I absolutely disagree with anyone that says city living is not possible for families. It has been shot down so many times now. Even in areas where there is a culture of suburbanisation it has proven to be a massive success. Take the Pearl District in Portland for example: http://en.wikipedia.org/wiki/Pearl_District,_Portland,_Oregon
http://explorethepearl.com/

It's a world-class example of both urban regeneration and urban living. An area like this in Dublin is more than achievable if we wanted to.

I am not disagreeing as such just making some points, Dublin council has offered a site for development in to 4 family size apartments to a cooperative that want to get together to provide housing for themselves, Ringsend has a community/housing association apartment complex. That means the will is there by the council to try this so there must be something else stopping it from further development.

mariaalice wrote: »

I am not disagreeing as such just making some points, Dublin council has offered a site for development in to 4 family size apartments to a cooperative that want to get together to provide housing for themselves, Ringsend has a community/housing association apartment complex. That means the will is there by the council to try this so there must be something else stopping it from further development.

It's not the same. We have huge swaths of the city which are prime for an urban regeneration project; restoration of buildings to family homes, demolition of buildings not fit for purpose (1950s-1990s) and construction of new work/life areas (apartments, offices, retail, restaurants and parks - all fit for purpose).