Central Bank to limit amount banks lend for home purchase

Mongfinder General

Piriz wrote: »

An important point to consider is the Financial Regulator failed massively during the boom and I would imagine they will make sure they are seen to regulate this time around. So if taking from the public purse is what's required to make an example of a breech of rules so be it hopefully.

I'm afraid not my friend. https://www.centralbank.ie/press-area/press-releases/Pages/SettlementAgreementbetweentheCentralBankofIrelandandQuinnInsuranceLimited(UnderAdministration).aspx

stevedublin

Piriz wrote: »

care to elaborate which segments and why?

it is becoming clear that price drops are likely to happen in mid/higher priced properties (€325k+ e.g. 3 /4 bed semi D in desirable areas) and cheaper properties are likely to rise.

Why? the 20% deposit is high for investors who want to borrow and invest and so they would look for cheaper properties.
1st time buyers would find the 10% deposit high and would also look for cheaper properties. Also, high-salaried 1st time buyers would find the 20% deposit high and would be looking for properties with only 10% (or maybe slightly higher) deposit. I think €325k could be the "inflection point".

The most expensive properties that the super-rich like John Malone would be looking at would be unaffected, I'd say.

Bob24

stevedublin wrote: »

Why? the 20% deposit is high for investors who want to borrow and invest and so they would look for cheaper properties.

Just to add that for BTL properties the required deposit with the new rules is 30%.

Mongfinder General

stevedublin wrote: »

it is becoming clear that price drops are likely to happen in mid/higher priced properties (€325k+ e.g. 3 /4 bed semi D in desirable areas) and cheaper properties are likely to rise.

Why? the 20% deposit is high for investors who want to borrow and invest and so they would look for cheaper properties.
1st time buyers would find the 10% deposit high and would also look for cheaper properties. Also, high-salaried 1st time buyers would find the 20% deposit high and would be looking for properties with only 10% (or maybe slightly higher) deposit. I think €325k could be the "inflection point".

The most expensive properties that the super-rich like John Malone would be looking at would be unaffected, I'd say.

Rock and a hard place. It's either pay a ridiculous rent or buy a place in somewhere that you'd rather not live.

It sorts out the dreamers. They type of thirty something couple seen whinging on Primteime because they can't get a 3 bed semi in SCD for 50 cent. Welcome to NAMA Land.

gaius c

Mongfinder General wrote: »

Rock and a hard place. It's either pay a ridiculous rent or buy a place in somewhere that you'd rather not live.

It sorts out the dreamers. They type of thirty something couple seen whinging on Primteime because they can't get a 3 bed semi in SCD for 50 cent. Welcome to NAMA Land.

Using ridiculous strawman arguments devalues your argument quite a bit.

Glenbhoy

The Spider wrote: »

However there seems to be a touch of desperation from people shouting for drops, nothing that I can see points to it, supply is down and the economy is going from strength to strength, in those circumstances barring external shocks I really don't see how prices can fall.

Here are a collection of properties I know very well, I have viewed each of them when they came up and whilst it obviously suits my agenda, the two properties sold in 2013, needed a fair bit of work done, the 2014 properties were in better shape and didn't require almost immediate refurb, however, the property listed for sale this week, is by far the best in terms of interior, it also has an attic conversion (although it seems like the garden has shrunk due to the conservatory).

April 2013 - 35 Priory Walk, Manor Grove, D.12 - €445K

https://www.propertypriceregister.ie/Website/npsra/PPR/npsra-ppr.nsf/eStampUNID/UNID-8AC38244BD697D0980257C4A0056C386?OpenDocument


Dec 2013 - 39 Priory Walk, Manor Grove, D.12 - €445k
https://www.propertypriceregister.ie/Website/npsra/PPR/npsra-ppr.nsf/eStampUNID/UNID-23FDA6F78569AF8E80257BE4003B96A9?OpenDocument

Feb 2014 - 26 Priory Walk, Manor Grove, D.12 - €510k

https://www.propertypriceregister.ie/Website/npsra/PPR/npsra-ppr.nsf/eStampUNID/UNID-0836B05D29D6AA0480257C92004CF8AF?OpenDocument

May 2014 - 44 Priory Walk, Manor Grove, D.12 - €505k

https://www.propertypriceregister.ie/Website/npsra/PPR/npsra-ppr.nsf/eStampUNID/UNID-3435F71E3950D26580257CF50050EEF0?OpenDocument


April 2015 - 14 Priory Walk, Manor Grove, D.12 - Listed for sale - Asking price - €490K

http://www.lowe.ie/s.1.3110660/index/6

Not definitive I know, but to me any it's a pretty good indication of what's going on out there at present. Surely, by the reports talking about 25% increases from 2013, the newly listed property should be coming on at €550K at least. These houses are identical in size, aspect slightly different and of course interiors have been amended in the 16 years since they were built.

Glenbhoy

Mongfinder General wrote: »

I don't have any evidence to suggest that the rules are not being enforced. I just wonder if the Regulator has the staff numbers or systems to check every mortgage approval against the rules?

Banks do the monitoring, they file regular reports to the CBI, the CBI will carry out field audits to ensure consistency with the reported data.
I'd be pretty shocked if the banks don't rigidly enforce the new rules, the fines are pretty big and that's only for first offences, subsequent breaches could have more serious sanctions.


Bear in mind there is scope to derogate from the rigid enforcement, the 15% rule etc...

Mongfinder General

gaius c wrote: »

Using ridiculous strawman arguments devalues your argument quite a bit.

Prove me wrong so. Obviously the 50 cent price tag is there as a jape.

gaius c

Mongfinder General wrote: »

Prove me wrong so. Obviously the 50 cent price tag is there as a jape.

Prove what wrong? Your ridiculous strawman argument?

Michael D Not Higgins

gaius c wrote: »

Prove what wrong? Your ridiculous strawman argument?

Also proving a negative is against the way this works. It's on the proposer to support their argument, in the same way the justice system or the scientific method works.

Mongfinder General

Michael D Not Higgins wrote: »

Also proving a negative is against the way this works. It's on the proposer to support their argument, in the same way the justice system or the scientific method works.

Maybe neither of you watch Primtime. I seem to recall a number of couples complaining that they couldn't find homes in their locale due to shortages/price. There are houses 5 mins from me that have never been lived in. These homes were built in 2007. Why have they not been sold? Because they don't have a post code containing a 2, 4, or 6. It is a ridiculous expectation to harbor in that your first home should be in one of the most desirable suburbs of Dublin.

Yes, primetime is a narrow gauge. The evidence I've witnessed is anecdotal. It comes from chatting with coworkers and friends, press coverage and some commentary from supposedly informed sources. I just can't fathom the deluded attitudes of some people. Some think that they've a god given right to live in a certain area, not where they can afford. As for Strawman argument, the above is no fallacy. I've experienced the above. It may not be a broad enough sample for your liking but I've based my opinion on it.

Mongfinder General

Glenbhoy wrote: »

Banks do the monitoring, they file regular reports to the CBI, the CBI will carry out field audits to ensure consistency with the reported data.
I'd be pretty shocked if the banks don't rigidly enforce the new rules, the fines are pretty big and that's only for first offences, subsequent breaches could have more serious sanctions.


Bear in mind there is scope to derogate from the rigid enforcement, the 15% rule etc...

Would this information be contained in a Corep or Finrep type report?

Glenbhoy

Mongfinder General wrote: »

Would this information be contained in a Corep or Finrep type report?

Not 100% certain, it's been quite a while since I spent time working in one of the big banks, but I do know that each bank has a compliance department who are tasked with ensuring compliance and completing returns for CBI primarily. CBI and these departments liaise extensively. Presumably CBI will have a template of the information they require to be submitted and banks will furnish that.

I also know from personal experience that (recent mortgage approval), that the rules are being applied on the ground and that approval software has been amended to take account of the new rules. After that first phase, the application goes to the underwriting and approvals and these guys are yet another level of safeguard to ensure compliance. You will also have internal audit departments within the banks who'll be reviewing credit decisions, most likely with a particular focus on the 15% of loans allowed to deviate from the rules.

In short, it's just not worth anyone's time (career) to try and get around these rules and I honestly expect the rules to be strictly adhered to.

Now, if prices start being impacted, you can be sure that banks and govt will start lobbying for changes, but that won't mean that rules won't be followed until that happens.

Eugene Norman

Mongfinder General wrote: »

Maybe neither of you watch Primtime. I seem to recall a number of couples complaining that they couldn't find homes in their locale due to shortages/price. There are houses 5 mins from me that have never been lived in. These homes were built in 2007. Why have they not been sold? Because they don't have a post code containing a 2, 4, or 6. It is a ridiculous expectation to harbor in that your first home should be in one of the most desirable suburbs of Dublin.

Yes, primetime is a narrow gauge. The evidence I've witnessed is anecdotal. It comes from chatting with coworkers and friends, press coverage and some commentary from supposedly informed sources. I just can't fathom the deluded attitudes of some people. Some think that they've a god given right to live in a certain area, not where they can afford. As for Strawman argument, the above is no fallacy. I've experienced the above. It may not be a broad enough sample for your liking but I've based my opinion on it.

If people save up and don't buy until their thirties then thats probably their one and only house. And the reason they can't buy is quite simple, we had a huge housing crash and we didn't repossess. These guys could buy for 50c if we let the repo men in.

I viewed a new development around November. Prices were pretty high, as was interest, so all the houses sold out. The CB lending rules were out to consultation but were not in force. I didn't bid as the prices were just too high.

Most of those houses were not built - there was a show house built during a previous phase and that is it. None of them, as far as I know, are occupied yet although most of them look close to be being finished.

Question: When do people draw down a mortgage on a new-build house?

I'm not interested in those houses myself any more but I'm beginning to wonder whether some of them may come back to market if mortgage AIP expires while people are waiting for the houses to complete.

For example, if you got approval in November and paid your deposit. Wouldn't that approval run out, in most cases, after six months? These gaffs were >500,000 euro so you'd need a serious deposit and income if your mortgage application had to meet the new rules.

I genuinely wouldn't wish this on anyone as it would be very stressful to lose out after such a long wait. But is there a possibility we'll see a few more houses bouncing back onto the market in the coming months as AIPs lapse because deals are not closed quickly enough?

BoatMad

if approval runs out ( anything from 3 to 6 months depending ) . Then you will reapply under new rules. I know someone doing this as we speak

Honohan is on his way out. Hopefully the new Governor will hold the line on these mortgage rules rather than rush into tweaking them just to appease some politicians and newspapers (I'm looking at you Irish Independent!).

I'm nearly certain some kind of madcap 'help to buy' scheme will be in the budget. FF have floated it and Labour backbenchers are saying the same things. The only hope is Brendan Howlin who noted that using shared public money to pump up property prices is stupid, unfair and counterproductive. I'm paraphrasing...

The_Conductor

I wonder why Honohan is leaving a year early? Smells of shenanigans happening in the background.........

gaius c

The_Conductor wrote: »

I wonder why Honohan is leaving a year early? Smells of shenanigans happening in the background.........

He's 65 or 66 I believe. Retirement is a more likely explanation.

gaius c

Deleted User wrote: »

Honohan is on his way out. Hopefully the new Governor will hold the line on these mortgage rules rather than rush into tweaking them just to appease some politicians and newspapers (I'm looking at you Irish Independent!).

I'm nearly certain some kind of madcap 'help to buy' scheme will be in the budget. FF have floated it and Labour backbenchers are saying the same things. The only hope is Brendan Howlin who noted that using shared public money to pump up property prices is stupid, unfair and counterproductive. I'm paraphrasing...

Never forget that the Irish Central Bank answer to Europe, not our chancers.

BoatMad

gaius c wrote: »

Never forget that the Irish Central Bank answer to Europe, not our chancers.

Yes and No. its subject to various control by the ECB. But it is still the CBI

jay0109

The_Conductor wrote: »

I wonder why Honohan is leaving a year early? Smells of shenanigans happening in the background.........

Election a year off...Govt want a yes man in place who won't diss their pre-election promises in relation to housing, no matter how madcap they are?

Mongfinder General

The realisation is hitting home on those with 40/60/80 grand deposits that all they'll be allowed to borrow/buy is a house in places like Tallaght/Finglas/Balbriggan. I think the governor of the central bank is looking at the election and thinking to himself that he doesn't want to be in the hot seat when the real pressure to row back on the measures implemented already comes on.

Anybody taking that job and thinking they'll have unfettered control is bonkers.

Villa05

Mongfinder General wrote:

The realisation is hitting home on those with 40/60/80 grand deposits that all they'll be allowed to borrow/buy is a house in places like Tallaght/Finglas/Balbriggan. I think the governor of the central bank is looking at the election and thinking to himself that he doesn't want to be in the hot seat when the real pressure to row back on the measures implemented already comes on.

One of those "penny drops moment" quotes.

Do you think that these lending restrictions which are based on international best practice and introduced by a widely respected central banker are the problem or could it be that prices in Dublin are just simply too high?

riclad

Banks should not be allowed to lend money for the purpose of buying bank shares.
I don,t know of any ghosts estates in dublin,
unless its an estate where the houses were not finished . .
You can drive around and you,ll see building sites ,with foundations ,
plots laid out , in dublin .
Where the builder went out of business .
And the building has stopped .
There maybe some apartment blocks in dublin that are not finished .

I think ghost estates are in rural area, where 100,s of houses were built ,
but there,s no demand for new houses ,
and people don,t want to commute miles from where they work.
To buy a house in cavan .
That,s the lesson of the boom, crash , we had in 2007.
banks will lie to anyone,
banks think no more than 6 months ahead .
Banks will go crazy in lending ,if there s not proper regulation ,
from the central bank .
Banks cannot be trusted to act in a logical manner ,
they will do things that make no sense .
IF theres no control on bank lending ,
house prices will rise ,and then fall again,
when some outside factor stops the boom.
And the banks will need to be bailed out again .
Even when it was obvious the boom was over, the banks were trying to pretend everything was ok.

Glenbhoy

Villa05 wrote: »

One of those "penny drops moment" quotes.

Do you think that these lending restrictions which are based on international best practice and introduced by a widely respected central banker are the problem or could it be that prices in Dublin are just simply too high?

Might it even be that eventually prices find a level at which equilibrium between the expectations of those who can afford to purchase, meets the price at which vendors are willing to sell, or, since Ireland is different, can our market be utterly dysfunctional for ever??

That said, Dublin prices aren't too high when people are willing to pay them, the rationale behind the purchase might be questionable (or heavily incentivised by govt policy), but, fair's fair, if a price is agreed between two parties, then has been priced correctly!

Bob24

Villa05 wrote: »

One of those "penny drops moment" quotes.

Do you think that these lending restrictions which are based on international best practice and introduced by a widely respected central banker are the problem or could it be that prices in Dublin are just simply too high?

Price are too high in terms of what would best serve the general interest in the long term. But they are also safely rigged by a few groups of interest who profit from high prices (banks, EAs, some investors, solicitors, brokers) and the short term selfish interest of the part of the population which owns a house and has no interest in trading up.

Question is how long can it last (it's been a while already).

Mr. teddywinkles

Glenbhoy wrote: »

Might it even be that eventually prices find a level at which equilibrium between the expectations of those who can afford to purchase, meets the price at which vendors are willing to sell, or, since Ireland is different, can our market be utterly dysfunctional for ever??

That said, Dublin prices aren't too high when people are willing to pay them, the rationale behind the purchase might be questionable (or heavily incentivised by govt policy), but, fair's fair, if a price is agreed between two parties, then has been priced correctly!

Yea but people in general aren't rational when it comes to money and how badly they want something. Its easy spend borrowed money. I find if iv the money in my hand. I'll haggle. Try find the best deal and look for something I really need.
Your whole mental approach is different.
Oh sure ill borrow more and sure if that doesn't work ill borrow more.
And henceforth the cycle is started.

Barely Hedged

Villa05 wrote: »

One of those "penny drops moment" quotes.

Do you think that these lending restrictions which are based on international best practice and introduced by a widely respected central banker are the problem or could it be that prices in Dublin are just simply too high?

Average industrial wage is €41k. Dublin is the capital city so it will have a higher share of the average wage workers and above.

41k * 2 * 3.5 = 287k.

On my home.ie 50% of the properties for sale in Dublin are <= 300k.

Are prices in Dublin too high - no.

What's your motivation for saying they are, based on the facts above - I don't know.

Bob24

Barely Hedged wrote: »

Average industrial wage is €41k. Dublin is the capital city so it will have a higher share of the average wage workers and above.

41k * 2 * 3.5 = 287k.

On my home.ie 50% of the properties for sale in Dublin are <= 300k.

Are prices in Dublin too high - no.

What's your motivation for saying they are, based on the facts above - I don't know.

Looking at asking prices for available properties is not enough though. What type of property you can get for these prices also matters. A high proportion of what is on sale in Dublin is crap that no one wants to buy even though it is cheaper, and these properties are lowering the average a lot as they are never getting off the market. In my opinion, for our country to be sustainable in the long term a couple who is on the average industrial wage should be able to afford a decently build house in a decently maintained neighbourhood. Whether or not it is the case is the real question (which is difficult to answer objectively as some people may say "yeah this is decent" about a rubbish place they would never live in themselves and others might have unreasonably high expectations about what a decent property is).