Central Bank to limit amount banks lend for home purchase

mr_seer · 19-10-2014 8:55pm

makeorbrake wrote: »

Strangely enough, I kind of guessed you wouldn't

That's not how they should function but of course that has been the irish experience to date. I think its fair enough to say that in other countries, they may be that much more likely to stick to script and do exactly what they are supposed to do i.e. REGULATE.

But then, in other countries policians trying to interfere in the working of a regulator - such as this - wouldn't be something that would be acceptable...

That's because in other countries the media don't collectively and unquestioningly spin high house prices as a good thing

ffactj · 19-10-2014 10:49pm

gaius c wrote: »

So let's all agree that we don't know, therefore we shouldn't talk about it and close up the forum?

Talk about it all you want. Just dont pretend you actually know what will happen though.
SUre the thread about a glut of reposessions driving property prices down, which reading through it had a lot of posts from your good self was closed because ... well how long can you keep saying something is going to happen and be wrong before you give up.

The_Conductor · 20-10-2014 6:56am

ffactj wrote: »

Talk about it all you want. Just dont pretend you actually know what will happen though.
SUre the thread about a glut of reposessions driving property prices down, which reading through it had a lot of posts from your good self was closed because ... well how long can you keep saying something is going to happen and be wrong before you give up.

If you have an issue with moderating- or want to question why I or one of my co-moderators has closed a thread- take it to us directly and we will respond in due course. It is not acceptable or appropriate to question moderator's decisions on thread.

Regards,

The_Conductor

handlemaster · 21-10-2014 7:17am

http://www.irishtimes.com/business/personal-finance/early-approval-can-beat-new-mortgage-rules-1.19706

It seems approval now is valid in 6mths time. This might change the sales demand up early next year.

NZ_2014 · 21-10-2014 7:34am

handlemaster wrote: »

http://www.irishtimes.com/business/personal-finance/early-approval-can-beat-new-mortgage-rules-1.19706

It seems approval now is valid in 6mths time. This might change the sales demand up early next year.

Article linked requires a subscription? Maybe you were logged in at the time. Think this is the article...

http://www.irishtimes.com/business/personal-finance/early-approval-can-beat-new-mortgage-rules-1.1970686

Barely Hedged · 21-10-2014 8:31am

handlemaster wrote: »

http://www.irishtimes.com/business/personal-finance/early-approval-can-beat-new-mortgage-rules-1.19706

It seems approval now is valid in 6mths time. This might change the sales demand up early next year.

If you get mortgage approval now, its generally valid for 6 months.

21-10-2014 8:37am

'Beat the regulator'. That's the spirit!

Maybe the banks will approve a few extra 80-85% loans to good customers well able to repay.

But they would be mad to push through a rake of new 90% mortgages which, if prices fall 10% in the wake of the new rules, would give them a brand new negative equity problem on top of the existing one.

NZ_2014 wrote: »

Article linked requires a subscription? Maybe you were logged in at the time. Think this is the article...

http://www.irishtimes.com/business/personal-finance/early-approval-can-beat-new-mortgage-rules-1.1970686

El_Dangeroso · 21-10-2014 9:37am

We won't see price drops (if any) until May/June 2015 I'd say.

Deco99 · 21-10-2014 9:51am

Sorry if this has been asked but I'm trawling the net to see what the predictions for property prices outside of Dublin are because of the new rules. There doesnt seem to be much discussion. Some feel the prices may actually go up.

gaius c · 21-10-2014 9:57am

El_Dangeroso wrote: »

We won't see price drops (if any) until May/June 2015 I'd say.

Activity in the sector in Dublin was actually dropping before the CB announcement as even the recent REA press release admitted.

gaius c · 21-10-2014 9:59am

Deleted User wrote: »

'Beat the regulator'. That's the spirit!

Maybe the banks will approve a few extra 80-85% loans to good customers well able to repay.

But they would be mad to push through a rake of new 90% mortgages which, if prices fall 10% in the wake of the new rules, would give them a brand new negative equity problem on top of the existing one.

People seem to miss that not all 90% mortgages are banned. The bank simply need to loan €6.50 at <80% LTV for every €1 they loan at >80% LTV. Entirely reasonable and buyers need to cop that these moves will help them in the long run.

El_Dangeroso · 21-10-2014 10:24am

gaius c wrote: »

Activity in the sector in Dublin was actually dropping before the CB announcement as even the recent REA press release admitted.

Do you reckon the announcement would bouy prices back up for a time as people panic buy?

gaius c · 21-10-2014 11:34am

El_Dangeroso wrote: »

Do you reckon the announcement would bouy prices back up for a time as people panic buy?

Truthfully, I think there's too many variables at play to make short-term predictions. Don't forget that CGT exemption is ending this year and this will probably have an effect too.

decco1981 · 21-10-2014 4:06pm

I think everyone is under estimating the effect of the incentive to investors which ends 31 Dec 2014. Don't think any serious investor will enter the market for at least two years - no incentive to do so.
With very little investors, demand will reduce and prices will fall from Feb/March 2015.
2015 we'll see - 5% for house prices.
If the new rules come in it'll be -10%

There are many variables but would be surprised if prices increase for 2015.

21-10-2014 4:25pm

decco1981 wrote: »

I think everyone is under estimating the effect of the incentive to investors which ends 31 Dec 2014. Don't think any serious investor will enter the market for at least two years - no incentive to do so.
With very little investors, demand will reduce and prices will fall from Feb/March 2015.
2015 we'll see - 5% for house prices.
If the new rules come in it'll be -10%

There are many variables but would be surprised if prices increase for 2015.

Fair play decco1981, pinning your predictions to the mast there! I'd broadly agree but wonder if the impact of the LTV/LTI rules will take a couple more months to fully kick in given that some FTBs could get 6-months approval in december?
(On that, am I right to say that BoI doesn't give approval in principle? I applied last year and was told I had to make a concrete application on a specific house which would then go thrpugh full underwriting process)

Do you assume that a lot of the cash in the market is investor money? I'd guess it is but don't have much to base that on.

I'd say the CGT change will have bigger impact on some areas amd minimal on others. What do investors buy and where? They want rental yield so it's apartments and smaller houses in cities and near hospitals/universities. Perhaps not so big on 4-beds in suburbia.

El_Dangeroso · 21-10-2014 5:56pm

Deleted User wrote: »

I'd say the CGT change will have bigger impact on some areas amd minimal on others. What do investors buy and where? They want rental yield so it's apartments and smaller houses in cities and near hospitals/universities. Perhaps not so big on 4-beds in suburbia.

That's something that I've thought about. The bubble seems to be mainly in houses that are desirable to FTB's (3/4 bed semis) there has been a rise in apartments sure, but no where near as much, surely an investor would get better yield on a 2 bed apt than a 3 bed semi in suburbia, and yet we're not seeing the same rises.

Makes me wonder how much of this boom in investor-led to begin with.

quadrifoglio verde · 21-10-2014 8:41pm

Deco99 wrote: »

Sorry if this has been asked but I'm trawling the net to see what the predictions for property prices outside of Dublin are because of the new rules. There doesnt seem to be much discussion. Some feel the prices may actually go up.

My crystal ball to my left says they'll fall, my one on the right says they'll rise. Sorry to be so blunt but do your own sums.
If you've found a house that you can afford to buy and can happily see yourself living there until death do yee part, then buy. Yes you might overpay, but you might underpay relative to what someone pays next year. family homes aren't property investments, they're a place to raise a family. Who cares if it falls in value in 5 years time, once you're happy with the house, the area and the repayments.

Deco99 · 21-10-2014 10:41pm

quadrifoglio verde wrote: »

My crystal ball to my left says they'll fall, my one on the right says they'll rise. Sorry to be so blunt but do your own sums.
If you've found a house that you can afford to buy and can happily see yourself living there until death do yee part, then buy. Yes you might overpay, but you might underpay relative to what someone pays next year. family homes aren't property investments, they're a place to raise a family. Who cares if it falls in value in 5 years time, once you're happy with the house, the area and the repayments.

No problem with you being blunt but I only asked if anyone had seen any discussion or articles related to outside of dublin. Whilst certainly not looking for an investment it could be a case of needing to sell in 5 years due to work or otherwise. I can do sums and if prices did drop isnt it better have an extra few grand in my pocket than someone elses? Sorry for derailing the dublin thread, I started another one elsewhere which was more constructive than I dont have a crystal ball.

quadrifoglio verde · 21-10-2014 10:51pm

Deco99 wrote: »

No problem with you being blunt but I only asked if anyone had seen any discussion or articles related to outside of dublin. Whilst certainly not looking for an investment it could be a case of needing to sell in 5 years due to work or otherwise. I can do sums and if prices did drop isnt it better have an extra few grand in my pocket than someone elses? Sorry for derailing the dublin thread, I started another one elsewhere which was more constructive than I dont have a crystal ball.

Here's the thing, I don't know what way the market is going to go, no one knows. It's no more than looking at stats, figures and long term trends and taking a guess as to how things will go.
I won't tell people my crystal ball gazing results because I don't want people to hold me liable for their financial decisions if they go the wrong way.
Buying a house that you might need to sell in 5 years time is risky, the price can fall and then you're trapped.
Which is why I'm saying if you're happy living there/owning it for the rest of your life, then buy, if not, then don't. It's that kind of crap that has people raising families in two bed shoeboxes

bluemartin · 22-10-2014 10:59am

irishtimes.com/business/sectors/commercial-property/nama-to-sell-hundreds-more-apartments-around-dublin-1.1971637

NAMA are making a good job in attracting foreign buyers, no doubt this practise will keep prices very high in the Dublin market.

22-10-2014 12:44pm

bluemartin wrote: »

irishtimes.com/business/sectors/commercial-property/nama-to-sell-hundreds-more-apartments-around-dublin-1.1971637

NAMA are making a good job in attracting foreign buyers, no doubt this practise will keep prices very high in the Dublin market.

Hundreds of apartments coming to market would surely depress prices, no?

handlemaster · 22-10-2014 12:50pm

Deleted User wrote: »

Hundreds of apartments coming to market would surely depress prices, no?

No affect at all. Apts are or will be rented. Infact the sooner they sell all the better it will stop people thinking NAMA have enought property to satisfy all. Im affraid if your holding out for a cheap nama Apt move on.

Michael D Not Higgins · 22-10-2014 12:52pm

Deleted User wrote: »

Hundreds of apartments coming to market would surely depress prices, no?

They selling them as blocks to investors.

22-10-2014 12:54pm

I'm not at all holding out for a cheap Nama apartment.

But fair enough, I should have read the article first! They are selling them as a job lot so it's investors-only. Agreed - it'll make no odds.

P. Breathnach · 22-10-2014 1:13pm

handlemaster wrote: »

No affect at all. Apts are or will be rented....

I don't see it that way. If NAMA sell significant numbers of apartments that are vacant, and those apartments come on to the rental market, there will be some downward pressure on rents. That, in turn, can drive down the price of individual apartments because investors might see lower expected returns in the rental market.

handlemaster · 22-10-2014 1:15pm

P. Breathnach wrote: »

I don't see it that way. If NAMA sell significant numbers of apartments that are vacant, and those apartments come on to the rental market, there will be some downward pressure on rents. That, in turn, can drive down the price of individual apartments because investors might see lower expected returns in the rental market.

How many would that be in order for that to happen?
In Dublin how many apts are left in Nama ?

bluemartin · 22-10-2014 1:16pm

P. Breathnach wrote: »

I don't see it that way. If NAMA sell significant numbers of apartments that are vacant, and those apartments come on to the rental market, there will be some downward pressure on rents. That, in turn, can drive down the price of individual apartments because investors might see lower expected returns in the rental market.

They is simply too much demand more and more people are migrating to Dublin from around the world indeed and from rural Ireland. the supply will need to be increased drastically for any reduction to be seen

Frank Lee Midere · 22-10-2014 1:22pm

Barely Hedged wrote: »

So for half a decade they were predicting price falls in a market that was clearly overheating. Sure that's easy, the hard part is pin pointing when it is going to happen and supplying specifics something you have a parallel with

http://touch.boards.ie/thread/2057157969/7

"So no, what will happen this year is a fall, cash buyers will wait it out, the fall will accelerate, cash buyers will panic and the dead cat bounce will resume its downward trajectory. Im thinking of buying mid next year at about 40% less than today,"

If it was so easy to predict a market over-heating you need to explain why Morgan Kelly was so hated, and how bulls, people who argued then like you do now, were predicting either soft landings, or "smart money getting in" about 2006-2008. The guys who predicted the bust, can hardly be expected to pin point the exact date. Thats ridiculous. They can just say "housing is overvalued historically and will revert to mean". Not getting the exact date right of a property collapse which nearly destroyed the entire economy and did destroy most all of the banks hardly makes their argument a fallacy.

A recent paper by a Trinity academic ( I will look for a link) plotted the use of the word bubble in Irish media. A bit like the Google graphs. There were 10 times as many references post 2008, than before. And some of the before references were poo-pooing the idea, of course.

And still we pretend that the bears were just lucky? And that it was obvious the market was "overheating". If you can't see 30% increases y-o-y as overheating you won't see anything as over-heating.

P. Breathnach · 22-10-2014 1:36pm

handlemaster wrote: »

How many would that be in order for that to happen?
In Dublin how many apts are left in Nama ?

I haven't gone into the numbers: I'm not sufficiently interested. I did say "significant numbers" with the intention of suggesting that a few apartments here and there would not be enough to have much impact.

Some months ago I viewed an apartment. There was an adjacent block of, I would guess, about 80 units being finished under a NAMA contract. A few blocks of that scale, if they exist, could have a noticeable effect on the market.

Michael D Not Higgins · 22-10-2014 1:40pm

"The seven schemes currently produce a rental income of €7.43 million" That works out to over €1000 per month per apartment. Not very many empty apartments coming on stream from this sale.

Saipanne · 22-10-2014 1:44pm

Frank Lee Midere wrote: »

If it was so easy to predict a market over-heating you need to explain why Morgan Kelly was so hated, and how bulls, people who argued then like you do now, were predicting either soft landings, or "smart money getting in" about 2006-2008. The guys who predicted the bust, can hardly be expected to pin point the exact date. Thats ridiculous. They can just say "housing is overvalued historically and will revert to mean". Not getting the exact date right of a property collapse which nearly destroyed the entire economy and did destroy most all of the banks hardly makes their argument a fallacy.

A recent paper by a Trinity academic ( I will look for a link) plotted the use of the word bubble in Irish media. A bit like the Google graphs. There were 10 times as many references post 2008, than before. And some of the before references were poo-pooing the idea, of course.

And still we pretend that the bears were just lucky? And that it was obvious the market was "overheating". If you can't see 30% increases y-o-y as overheating you won't see anything as over-heating.

I'd like to see that paper, sounds fascinating.

22-10-2014 1:52pm

Frank Lee Midere wrote: »

If it was so easy to predict a market over-heating you need to explain why Morgan Kelly was so hated, and how bulls, people who argued then like you do now, were predicting either soft landings, or "smart money getting in" about 2006-2008. The guys who predicted the bust, can hardly be expected to pin point the exact date. Thats ridiculous. They can just say "housing is overvalued historically and will revert to mean". Not getting the exact date right of a property collapse which nearly destroyed the entire economy and did destroy most all of the banks hardly makes their argument a fallacy.

I agree with all this but the Irish property market reminds me of the Keynes quote: "the market can remain irrational longer than you can remain solvent".

A crash at some stage was obvious from a long way out but it didn't mean buying was a bad idea, and it didn't make advice not to buy property the 'right' advice at the time.

Frank Lee Midere · 22-10-2014 1:54pm

bluemartin wrote: »

They is simply too much demand more and more people are migrating to Dublin from around the world indeed and from rural Ireland. the supply will need to be increased drastically for any reduction to be seen

This is 2008 assumptions again. Back then the bulls pointed to more and more people migrating to Dublin from everywhere. Then that stopped. Reversed in most cases. It's a fluke of the bust ( Southern Europe being even more bankrupt than Ireland) which has caused the recent population changes.

Depending on that is it's own bubble.

Frank Lee Midere · 22-10-2014 1:56pm

[Deleted User] wrote: »

I agree with all this but the Irish property market reminds me of the Keynes quote: "the market can remain irrational longer than you can remain solvent".

A crash at some stage was obvious from a long way out but it didn't mean buying was a bad idea, and it didn't make advice not to buy property the 'right' advice at the time.

Yes I suppose that's true. Not least because nobody is getting repossessed. Buying property at over inflated prices may destroy the economy but you personally will be protected.

MayBea · 22-10-2014 2:51pm

Deleted User wrote: »

On that, am I right to say that BoI doesn't give approval in principle? I applied last year and was told I had to make a concrete application on a specific house which would then go thrpugh full underwriting process

A colleague has just been approved for a mortgage from BOI. Application process took 4 weeks for him, nothing was said about picking a particular house beforehand.

22-10-2014 2:58pm

Thanks MaryBea,

That's very interesting - and, for me, a tiny bit annoying because they made me pick a particular house at a specific price rather than just apply to see how much they would really offer us.

Frank Lee Midere · 22-10-2014 3:01pm

Deleted User wrote: »

Thanks MaryBea,

That's very interesting - and, for me, a tiny bit annoying because they made me pick a particular house at a specific price rather than just apply to see how much they would really offer us.

A colleague of mine suggests that is a formality. Pick a house which is pretty expensive, and you are pre-approved for lower draw downs.

Frank Lee Midere · 22-10-2014 3:03pm

P. Breathnach wrote: »

I don't see it that way. If NAMA sell significant numbers of apartments that are vacant, and those apartments come on to the rental market, there will be some downward pressure on rents. That, in turn, can drive down the price of individual apartments because investors might see lower expected returns in the rental market.

They may not be vacant. This NAMA manipulation of the market exposes the pseudo-concern of the Gombeen classes for the FTB's. Clearly putting these on the normal market would depress prices and be a far better benefit to the FTB than chasing increasing credit to increase prices in a supply deficient market , credit which they will have to pay back. They, or the tax payer.

Mr.McLovin · 22-10-2014 3:11pm

http://www.independent.ie/business/personal-finance/enda-kenny-wades-into-row-over-central-banks-mortgage-cap-plans-30684117.html

Enda to the rescue...

The Taoiseach has warned that home ownership should remain an "attainable ambition for young credit worthy families," during a speech in Dublin.

It is his first intervention into the issue of a plan to cap most home loans at 80pc of the value of a property.

He said the Government will now examine a mortgage insurance scheme. That could make house purchases easier to attain for borrowers, but put the State on the hook for some of the debt.

In a speech today however, the Taoiseach warned "without access to mortgage credit, young families will place increasing demand on the rental and social housing markets."

22-10-2014 3:21pm

Frank Lee Midere wrote: »

A colleague of mine suggests that is a formality. Pick a house which is pretty expensive, and you are pre-approved for lower draw downs.

Yes, that was my experience. It was a case of picking a house more or less in the ballpark that we might like to buy; get full approval; then go find an actual house.

We then found a house but had to put in a new application for fresh approval - which was done in 24 hours because they had been through all our details before. As it happens, we got outbid so didn't buy. Then we found another house and had to apply again (very quick). And were outbid again.

The reason this detail seems relevant is that 'new' mortgage approvals from Jan 1 will be subject to the new rules but 'existing' mortgage 'approval in principle' might survive a few more months.

My interpretation is that BoI don't do approval in principle and that each application is a new unique arrangement.

So if I have approval on a particular house from BoI but want to buy a different house in February, I take it we will be dealing with a 'new' application rather than using the previous approval.

I'm not sure even I know what I'm talking about any more

I'm just trying to figure how when the new rules will truly kick in.

22-10-2014 3:29pm

Mr.McLovin wrote: »

http://www.independent.ie/business/personal-finance/enda-kenny-wades-into-row-over-central-banks-mortgage-cap-plans-30684117.html

Enda to the rescue...

They have been floating this for a while now, well before the Central Bank's proposals. And economists have warned that it will fuel the bubble - which is not good for FTBs.

Lucy B · 22-10-2014 4:09pm

I read the article, but what exactly is it that enda is proposing they will do to help first time buyers?

Michael D Not Higgins · 22-10-2014 4:13pm

Lucy B wrote: »

I read the article, but what exactly is it that enda is proposing they will do to help first time buyers?

A mortgage insurance scheme, which will only push the FTB price up further. In the Central Bank's own words:

"A recent Government strategy document indicated that consideration would be given to the concept of a mortgage insurance scheme. No details of such a scheme have yet been announced. Any such scheme would need to be carefully thought through in terms of its potential for resulting in fiscal costs as well as the risk that it could exacerbate housing price dynamics. "

MayBea · 22-10-2014 4:26pm

Deleted User wrote: »

Thanks MaryBea,

That's very interesting - and, for me, a tiny bit annoying because they made me pick a particular house at a specific price rather than just apply to see how much they would really offer us.

They must've changed the rules since last year..
I have just spoken to my colleague again and he said that he was in fact asked for the exact amount he would like to borrow (still, not for the specific house though). He asked for the amount of 4x times his gross income and was approved for this sum.

Mr.McLovin · 22-10-2014 4:33pm

Lucy B wrote: »

I read the article, but what exactly is it that enda is proposing they will do to help first time buyers?

it will encourage banks to lend more money to more people because the tax payer has guaranteed it

what could go wrong?

22-10-2014 5:11pm

Interesting, thanks a lot.

Do you happen to know how long it will be valid? (Final question

)

MayBea · 22-10-2014 5:46pm

Deleted User wrote: »

Interesting, thanks a lot.

Do you happen to know how long it will be valid? (Final question )

He received an approval in principal valid for 6 full months. I will be applying myself within the next few weeks, so will be in the position to update with the fresh info

gaius c · 22-10-2014 5:53pm

Frank Lee Midere wrote: »

They may not be vacant. This NAMA manipulation of the market exposes the pseudo-concern of the Gombeen classes for the FTB's. Clearly putting these on the normal market would depress prices and be a far better benefit to the FTB than chasing increasing credit to increase prices in a supply deficient market , credit which they will have to pay back. They, or the tax payer.

Read the article.

The seven schemes currently produce a rental income of €7.43 million but the agents say this figure could be increased to around €8.7 million through improved asset management.

That would imply that approx 15% of them are being "under-utilised" through "sub-optimal asset management", which would come as no surprise to anybody who has marveled at the increasing rents in Tallaght despite all the empties around the Square.

Either way, the fact that they want to sell them to anybody bar ordinary joe soaps who would pay more suggests that they aren't really that interested in genuinely getting the best deal for the taxpayer.

22-10-2014 9:18pm

MayBea wrote: »

He received an approval in principal valid for 6 full months. I will be applying myself within the next few weeks, so will be in the position to update with the fresh info

Great - keep us posted and good luck!

Glenbhoy · 23-10-2014 11:37pm

MayBea wrote: »

He received an approval in principal valid for 6 full months. I will be applying myself within the next few weeks, so will be in the position to update with the fresh info

Approval in principle is exactly that, it is approval in principle, it's a very good indicator of what the bank will allow you to drawdown, it is NOT an offer letter however.
As I've stated before, I think on this thread, the central bank document states that it expects banks to take account of the new rules from last Tuesday, I gather that the banks and brokers etc have been lobbying the CBI to try and come to a compromise in situations where approvals have already been granted and so on, but there's no guarantee that will result in agreement.
It may be of course that your friend will qualify for that amount in any case as the CBI document does allow for some wriggle room for the banks in that a percentage of borrowing does not have to comply with the terms proposed.

Central Bank to limit amount banks lend for home purchase

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