Banking dilemma

Laminations

The following is anecdotal but it made me think. I gladly welcome evidence supporting or debunking this possibility.

So there is this new housing estate where houses were originally on sale for circa 350 grand. A friend of a friend recently had an offer accepted of 190 grand. He went to the bank and was denied a mortgage. He is not in the risky category of unable to pay.
Could it be the case that in lending this money, the bank would be setting a marker for other houses in the area. Houses would begin selling for far below original estimates, estimates upon which developer loans were secured. Are banks refusing to lend for low mortgages as developers would make less and hence banks would get less of the developers loan repaid? Are banks colluding to stop house prices hitting floor?

SkepticOne

Not sure if that is what is happening here but there have been threads about banks not lending below a certain floor posted in the Accommodation and Property forum. One in particular had a journalist contacting a bank, who did not deny the policy, but explained that it was to protect the borrower. You might ask on that forum. The thread was from about a year ago but would be hard to find now.

ei.sdraob

190K for a place in a ghost estate? :eek: what is the location btw?

anyways the banks are certainly eager to lend if they think there is money to be made (for them), you are right they dont think there is "good value" there, who does?

just out of interest what is the (re)build cost of that house he is looking at?
find the rebuild cost (insurance companies usually need this) then add another 5-10k for the land beneath it and then go to bank asking for that amount minus 10-20%

anyways as was mentioned in the parallel thread here recently with deflation still being with us, why not just save for another year? it should be easier to get a mortgage with a lower loan ratio, while the banks are still "offering" 92% they are quite clear on their right to refuse it


anecdotally I was in bank last week, and my manager out of the blue offered (yet again) the facility to borrow a smallish loan (under 100k) to complete and furnish my self-build, i politely refused

Laminations

Hi ei. The location is Naas. I'm not saying the bank wont lend because they dont think the house is worth as much as 190k. I'm asking what if selling at this price reduces the other houses in the estate to this level. If the bank lent money to a developer to build the estate and the developer gets far less than anticipated selling the houses, then the bank by giving out low mortgages are ensuring developers cannot pay them back.

So it'd be in the banks interest not to lend for new builds at too cheap a price.

ei.sdraob

Laminations wrote: »

Hi ei. The location is Naas. I'm not saying the bank wont lend because they dont think the house is worth as much as 190k. I'm asking what if selling at this price reduces the other houses in the estate to this level. If the bank lent money to a developer to build the estate and the developer gets far less than anticipated selling the houses, then the bank by giving out low mortgages are ensuring developers cannot pay them back.

Yeh I understand

and wouldn't be surprised at all if the banks are doing what you think they are doing in that estate

I wonder can names of all NAMA properties/debtors in this area be disclosed via freedom of information request, another negative for NAMA it being an opaque instrument, the property market in Ireland already suffers from lack of info available to buyers (unlike UK)

If your theory is correct then its very perverse aint it? we would actually have a concrete example of an organized attempt to prop up house prices