Income Multiple Limits on Mortgages

draiochtanois · 21-10-2014 1:21pm

This post has been deleted.

Larry Wildman · 21-10-2014 6:58pm

djpbarry wrote: »

There's absolutely no way a flat being rented for €1,300 per month would be available to buy at €200k. You're undervaluing by about €50k, at least.

Sorry, but you're totally wrong.

Dannyboy83 · 22-10-2014 12:07am

draiochtanois wrote: »

This post has been deleted.

I was renting this for 1k per month.
http://www.daft.ie/lettings/bride-holm-apt-old-mallow-road-near-cork-blackpool-cork/1470924/
The Landlord kept my deposit.
After that experience, I knew if I was going to stay in Ireland, I knew I would have to buy.
Threshold and PRTB are hopeless (or were at least).

It was subsequently for sale for 110k and it couldn't be shifted.
Now it's rented for 850.

Is it even worth 100k I wonder?
92k over 30 years = 465

I pity anyone facing long term renting in Ireland.
You have no rights and no protection.

bit of a bogey · 22-10-2014 12:56am

What do people think the impact of these mortgage limits will be on the banks?

In reality, the banks don't give out mortgages to those they who can just pay. They give them out based on the speculation that they are going to make money.

With a potential curtailment of property price increasing and a reduction in allowable loan amounts, they are surely going to see an impact to their profits. i.e. people wont be able to get such sizable loans, will have more affordable monthly repayments and can hence reduce the repayment time.

How are the banks going to offset any losses? Hard to see them just swallowing it?

Frank Lee Midere · 22-10-2014 1:00am

Julia85331 wrote: »

What's sense of entitlement? Both myself and my partner work full time and we will never be able to save a 20% deposit. We are paying €16k a year rent and €10k childcare alone. That's before buying groceries or paying a bill.
Our rent at €1300 a month would be reduced to a mortgage payment of €750
More money back into the economy and a higher standard of living.
We've been renting for four years and have paid around €55k in rent and it's going up every year.
I really see no sense of entitlement in us or our friends in the same position.
The lady in the bank even told us not to go on holidays or buy Desiegner clothes ha! She referred to €150 I spent in next!
Really don't understand how this is a good thing for anyone .
It will see investors snapping up property's and a reduction in first time buyers

Your mortgage payment of 750 would barely get a loan of 120k. Why can't you save 20k?

Frank Lee Midere · 22-10-2014 1:02am

Larry Wildman wrote: »

It's about right actually.

A mortgage of €160k is around €750 per month over 30 years.

The same €200k apartment can pretty easily be let for €1,300 a month.

In which case she would need the 40k. Everybody here is assuming a 3.9% interest rate. But you only get that with a 20% deposit anyway.

Frank Lee Midere · 22-10-2014 1:04am

Larry Wildman wrote: »

Sorry, but you're totally wrong.

Try and link to one then? Should be easy.

Frank Lee Midere · 22-10-2014 1:08am

draiochtanois wrote: »

In Cork you can apartments that rent for 1000 per month for 90k so it's entirely believable.

Apartments are undervalued relative to the cost of building them and what they rent for.

And in Cork county there are lots of 3 bed semis being sold for less than the construction costs.

Nobody is denying that outside Dublin prices are cheap. Dublins recent surge is the issue and the reason the CB intervened. As far as I know the ECB is taking over that role next week after the stress tests ( which will quite probably be a shock to the Irish banks) and I guess they will tighten up credit.

The best thing the ECB could do is loosen credit to developers and keep it tight for house buyers.

bit of a bogey · 22-10-2014 1:21am

Frank Lee Midere wrote: »

Try and link to one then? Should be easy.

http://www.daft.ie/lettings/the-rectory-stepaside-dublin/1497318/

http://www.daft.ie/sales/61-the-rectory-stepaside-dublin/944373/

Scofflaw · 22-10-2014 3:09am

bit of a bogey wrote: »

What do people think the impact of these mortgage limits will be on the banks?

In reality, the banks don't give out mortgages to those they who can just pay. They give them out based on the speculation that they are going to make money.

With a potential curtailment of property price increasing and a reduction in allowable loan amounts, they are surely going to see an impact to their profits. i.e. people wont be able to get such sizable loans, will have more affordable monthly repayments and can hence reduce the repayment time.

How are the banks going to offset any losses? Hard to see them just swallowing it?

I'm not sure how the banks "give them out based on the speculation that they are going to make money". If you buy a property with a €200k mortgage, and the value of the property appreciates by 50%, the bank still only gets back the €200k plus interest, exactly as it does if the property remains the same price or depreciates.

What banks get out of a bubble is more and bigger loans, and less risk - while the bubble lasts - or non-repayment, because someone who can't meet the mortgage repayment out of income can meet it out of appreciation.

Unless you mean that a lower value property market overall means lower profits for the banks? It does, but it also means lower risk. And, after all, the reason the banks are currently hugely in debt is that what appeared to be hugely profitable lending opportunities were actually just hugely risky ones.

There are two modes of profitable operation for banks, a low-risk low-profit one that's sustainable in the long-term, and a high-risk high-profit one that's not. We're talking about the banks returning to the first model for as long as it takes everybody to forget that the exciting option invariably blows up in everybody's faces - which is maybe 10 years if we're lucky.

cordially,
Scofflaw

Cleveland Hot Pocket · 22-10-2014 9:20am

Dannyboy83 wrote: »

I pity anyone facing long term renting in Ireland.
You have no rights and no protection.

As a 10 year renter in Dublin (and now Meath) to date, you have plenty of protection.
Google Part 4 tenancy, and you will see your notice entitlements and so on.
Also, it is pretty difficult to legally evict a tenant.

The landlord keeping your deposit is only because you let him. You should pursue to the PTRB and get a judgement against the landlord and then follow up with the sheriff to enforce if needed.
(Or in future, stay the final month and use the deposit to pay for it. Legally the landlord cannot evict you without giving 14 days notice to pay and 28 days notice after that)

djpbarry · 22-10-2014 9:46am

draiochtanois wrote: »

This post has been deleted.

According to the latest Daft reports, a 2-bed in Cork City will rent for €830 and sell for €97k. Sure, there might be the odd place that rents for €1,000 and sells for €90k, but on average, that’s not going to be the case.

djpbarry · 22-10-2014 9:47am

Larry Wildman wrote: »

Sorry, but you're totally wrong.

No, I’m not. For example, average rents for 2-bed flats in Dublin City Centre are currently €1,200 – 1,300, while the average sale price for such a property is €240k.

djpbarry · 22-10-2014 9:47am

Dannyboy83 wrote: »

I pity anyone facing long term renting in Ireland.
You have no rights and no protection.

Nonsense.

There is plenty of protection for tenants in Ireland. The problem is, most seem unaware of their rights.

bit of a bogey · 22-10-2014 10:11am

Scofflaw wrote: »

Unless you mean that a lower value property market overall means lower profits for the banks? It does, but it also means lower risk. And, after all, the reason the banks are currently hugely in debt is that what appeared to be hugely profitable lending opportunities were actually just hugely risky ones.

This is more so my point in that they are going to be less profitable. Less Risk = Less potential profit but even more so in that smaller loans = less interest, less profit. I’m intrigued to see how this pans out as I can’t see the banks simply swallowing a reduction in profits. Like most corporations, I expect them to seek compensation through other revenue streams.

draiochtanois · 22-10-2014 10:18am

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Cleveland Hot Pocket · 22-10-2014 10:22am

draiochtanois wrote: »

This post has been deleted.

Self protection tbh.
Lots of LL don't return the deposit.

If it goes to court it would be laughed out. LL will say buyer owes me one month rent and the buyer would say the LL owes me my deposit of 1 month's rent.

FreudianSlippers · 22-10-2014 10:32am

Cleveland Hot Pocket wrote: »

Self protection tbh.
Lots of LL don't return the deposit.

If it goes to court it would be laughed out. LL will say buyer owes me one month rent and the buyer would say the LL owes me my deposit of 1 month's rent.

Under €2,000 it would go to the small claims court and it would not be laughed out.

Cleveland Hot Pocket · 22-10-2014 10:45am

FreudianSlippers wrote: »

Under €2,000 it would go to the small claims court and it would not be laughed out.

LL = He owes me 1000
Tenant = He owes me 1000

How would that not be laughed out?

Also I don't think it can go to the small claims court over rent, doesn't it have to go via PTRB

FreudianSlippers · 22-10-2014 10:52am

Cleveland Hot Pocket wrote: »

LL = He owes me 1000
Tenant = He owes me 1000

How would that not be laughed out?

Also I don't think it can go to the small claims court over rent, doesn't it have to go via PTRB

No you're right, I was thinking of specific rental deposits (i.e. holiday homes, etc.) - the rest go to the PTRB. The landlord would have to prove that they had good reason for keeping the deposit though. Presumably, the tenant could easily show that their rent is up-to-date.

Brussels Sprout · 23-10-2014 9:00am

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)?

FreudianSlippers · 23-10-2014 9:08am

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)?

I heard that too, but the only source I could find was the Herald: http://www.herald.ie/news/enda-bid-to-ease-home-loan-fears-of-buyers-30686052.html

BoJack Horseman · 23-10-2014 9:17am

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 · 23-10-2014 9:24am

BoJack Horseman wrote: »

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.

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

BoJack Horseman · 23-10-2014 9:40am

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.

hmmm · 23-10-2014 10:14am

Brussels Sprout wrote: »

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)?

There's word that the government (i.e. the taxpayer) will guarantee 10% of the mortgage. Which is such a crazy idea that you'd hope it is only kite flying by some VI - but this is Ireland where piling more debt on young people & creating a second property price bubble seems to be the main aim of politicians, media and an awful lot of the population.

Scofflaw · 23-10-2014 2:05pm

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

hmmm · 23-10-2014 2:35pm

Scofflaw wrote: »

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.

This would be an excellent opportunity for the regulator to assert their independence & prudential function by matching any attempt by politicians of the day to subvert their new rules, by applying a commensurate increase in the deposit requirements. We've already seen that politicians will ignore the fiscal council, and we are rapidly heading back to the policies of the early 2000s.

Chips Lovell · 23-10-2014 2:36pm

If it is an insurance type scheme, could the cost be borne by having the buyer pay a premium?

mariaalice · 23-10-2014 2:56pm

Do you think we will ever get away form the populous verses the prudent carry on!

I don't agree with the 20% by the way maybe 15%.

NewDirection · 23-10-2014 4:34pm

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 · 23-10-2014 4:39pm

NewDirection wrote: »

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.

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

NewDirection · 23-10-2014 4:51pm

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 · 23-10-2014 5:05pm

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mariaalice · 23-10-2014 5:26pm

draiochtanois wrote: »

This post has been deleted.

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.

quadrifoglio verde · 23-10-2014 8:50pm

NewDirection wrote: »

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.

It's a case of I want a house and I want it now

Brussels Sprout · 23-10-2014 10:23pm

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

Scofflaw · 23-10-2014 11:34pm

mariaalice wrote: »

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.

You can go up as well as out.

cordially,
Scofflaw

Scofflaw · 23-10-2014 11:41pm

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 · 24-10-2014 6:44am

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.

mariaalice · 24-10-2014 8:22am

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.

mariaalice · 24-10-2014 8:54am

Scofflaw wrote: »

You can go up as well as out.

cordially,
Scofflaw

All that would happen then is that people could possible live in the area they want but not in the accommodation they want, swooping one problem for another.

It slightly irritates me when people say they live in apartments in mainland Europe with families so why cant we do it. They have completely different patterns of property provision and have had for century's, a completely different culture, we are not German or Hungarian we are Irish.

draiochtanois · 24-10-2014 9:22am

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mariaalice · 24-10-2014 9:43am

draiochtanois wrote: »

This post has been deleted.

How do you define safe playgrounds, plus even if you were right there is very little to no development land in the areas that people want to liven( in Dublin anyway ) so how could your apartments be built.

draiochtanois · 24-10-2014 10:07am

This post has been deleted.

FreudianSlippers · 24-10-2014 10:14am

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.

mariaalice · 24-10-2014 10:33am

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 · 24-10-2014 10:40am

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.

It is a very good example of urban development, how did they get on with interrogating the gritty urban locals and those mainly relying on social welfare for an income in the redevelopment.

FreudianSlippers · 24-10-2014 10:55am

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).

FreudianSlippers · 24-10-2014 11:10am

mariaalice wrote: »

It is a very good example of urban development, how did they get on with interrogating the gritty urban locals and those mainly relying on social welfare for an income in the redevelopment.

The area was a fairly run-down area of dodgy flats and warehouses. The city zoned the area and set out a plan for regeneration with tax increment funding plans. Those plans required all developments to make 30% of the housing affordable (here it would be social) - this meant they were fully integrated and mixed in to the rest of the community living there.

There were of course vetting processes and rules to which all tenants had to comply. The planning ensured adequate local schooling, services, shops and outdoor space. There are actually 3 fairly good sized parks (one is probably Stephen's Green sized and the other two about half the size, one of which has an outdoor water thing for kids to play in).

Income Multiple Limits on Mortgages

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