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Central Bank to limit amount banks lend for home purchase
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Yea I see your point, but I was just throwing that figure out there as an example. It's usually not feasible for people to move to a rent-free lifestyle for a period of time. To save that sort of money for the average person I think would require significant cost cuttings and giving up all forms of having a life for a period of time.
Can't wait until we see the price drop that these rules are supposed to bring in (that's one of the arguments for them, right?).
Though to be fair, the figures in that image are lower than I thought. I didn't for example know that a 300k purchase would require a 38k deposit, I assumed it'd be 50+. Though 36k is still a large amount of cash.0 -
life has other expenses , a 10% (up to 220k) or 20% above deposit is really not a lot in relative terms, the days of 95-105% mortgages are thankfully gone, saving for a deposit and paying rent at the same time is a decent stress test for when interest rates start going back to 8-10%0
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Eric Cartman wrote: »life has other expenses , a 10% (up to 220k) or 20% above deposit is really not a lot in relative terms
That's a rather blasé statement to make. Relative to what exactly?
Also you're assuming the only people buying are FTBs. Most of the people I know buying houses are trading up and they're not exactly swimming in equity. In most cases they're selling now because they've reached a price where they can just clear their mortgage. In that case, they have to save 20% which is quite a bit.0 -
There's the problem again. Since the "solution" came from bankers who all earn €300k+, they think that all we have to do is go down into that special room in the cellar (the ones politicians seem to think we all have) where we keep pirate chests chests full of gold doubloons, piles of gold jewelry, priceless painting, walk up to the wall safe and take out this piddling amount (unless we have it in our arse pocket or behind a sofa cushion) to slap down cash on the counter without thinking about. It's not like we have to save for years and years only to be scalped by the banks on fraudulent terms and conditions and having to pay sky-high rip-off interest rates the thieving bastards at the banks charge because they know they can get away with it.
Giving house buyers a sh*tty deal is a long standing tradition in Irish banks and building societies, the state is practically built on it.
This will solve nothing in the long run. It's more like a deal to make sure only "proper" people can afford houses and keep the riff-raff on the social housing waiting list.0 -
That's a rather blasé statement to make. Relative to what exactly?
Also you're assuming the only people buying are FTBs. Most of the people I know buying houses are trading up and they're not exactly swimming in equity. In most cases they're selling now because they've reached a price where they can just clear their mortgage. In that case, they have to save 20% which is quite a bit.
if your selling up a large deposit shouldn't be much of an issue as you have a house to sell ,
we were talking about renters buying, you just moved the goalposts on the conversation.0 -
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Eric Cartman wrote: »life has other expenses , a 10% (up to 220k) or 20% above deposit is really not a lot in relative terms, the days of 95-105% mortgages are thankfully gone, saving for a deposit and paying rent at the same time is a decent stress test for when interest rates start going back to 8-10%
I'd say it's far beyond a "decent stress test".
For example, by my count (which admittedly could be wrong) a 30year 260k mortgage would be about 1700 a month at about 7.3% interest. Using 260k as this was the 38k / 300k purchase price mortgage mentioned in the Irish Times figures above.
Much less than this 1500 saving (as an example figure) plus rent costs (which in Dublin is probably going to be another 1200 or above for the average person).
Though I am open to correction on my figures.0 -
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Eric Cartman wrote: »life has other expenses , a 10% (up to 220k) or 20% above deposit is really not a lot in relative terms, the days of 95-105% mortgages are thankfully gone, saving for a deposit and paying rent at the same time is a decent stress test for when interest rates start going back to 8-10%
Eric- rates are *not* going to go up to 8-10% (unless we bomb out of the Euro- and even then, with our balance of payments- its still not likely).
'Normalisation' of ECB rates- suggests an overnight rate in the region of 4-4.5%- levels at which mortgage rates of in the region of 6% of more normal.
However- we're reheating old misconceptions here. Banks do not borrow ECB money (by and large) to lend out to punters for mortgages. They borrow long term through bond issues from institutional investors. The ECB rate- is the rate charged for parking excess liquidity with the ECB- its set at an artificially low level- to try to get banks to work their assets- rather than parking them at the ECB. Normal behaviour is for banks to release any excess liquidity on an nightly basis, to the interbank market- where Barclays in the UK- could release excess cash to Santander (for example) at a higher rate than parking it with the BOE.
This interbank lending died a spectacular death with the implosion in the financial markets 8 years ago. The ECB, BOE etc- are trying to shock this alternate funding into life again- aside from any other reason- it adds significantly to the multiplier effect QE generates.
Your SVR mortgage rate is determined by the cost of long term borrowing for your lender. BOI can lock in 10 year borrowing at around 2,5%- which is pretty good going- but its a world away from the ECB overnight rates (which are effectively in negative territory.
In an Irish context- particularly after the massive advertising for tracker mortgages at the height of the boom- people have an expectation that their mortgage rate should have a direct correlation to the ECB rates- when in actual fact, they don't.
What Irish banks and lenders need to do- is issue long term (30-40 year debt) to pension funds etc- and use this guaranteed funding costs- to price fixed term fixed price products for the entire length of mortgages on the market. Its what happens in almost every other country in Europe- the Irish market is very much an outlier in this respect.
So- look at the borrowing costs for BOI, AIB etc- what price can they get bonds out the door for various time periods. Add 1.5-2% to these- to get consumer rates. This is a reasonable manner of determining likely rates- not the ECB set rates.
The Irish misconception about how the ECB rates govern their lives- really *needs* to be reaccessed.0 -
The_Conductor wrote: »Eric- rates are *not* going to go up to 8-10% (unless we bomb out of the Euro- and even then, with our balance of payments- its still not likely).
'Normalisation' of ECB rates- suggests an overnight rate in the region of 4-4.5%- levels at which mortgage rates of in the region of 6% of more normal.
However- we're reheating old misconceptions here. Banks do not borrow ECB money (by and large) to lend out to punters for mortgages. They borrow long term through bond issues from institutional investors. The ECB rate- is the rate charged for parking excess liquidity with the ECB- its set at an artificially low level- to try to get banks to work their assets- rather than parking them at the ECB. Normal behaviour is for banks to release any excess liquidity on an nightly basis, to the interbank market- where Barclays in the UK- could release excess cash to Santander (for example) at a higher rate than parking it with the BOE.
This interbank lending died a spectacular death with the implosion in the financial markets 8 years ago. The ECB, BOE etc- are trying to shock this alternate funding into life again- aside from any other reason- it adds significantly to the multiplier effect QE generates.
Your SVR mortgage rate is determined by the cost of long term borrowing for your lender. BOI can lock in 10 year borrowing at around 2,5%- which is pretty good going- but its a world away from the ECB overnight rates (which are effectively in negative territory.
In an Irish context- particularly after the massive advertising for tracker mortgages at the height of the boom- people have an expectation that their mortgage rate should have a direct correlation to the ECB rates- when in actual fact, they don't.
What Irish banks and lenders need to do- is issue long term (30-40 year debt) to pension funds etc- and use this guaranteed funding costs- to price fixed term fixed price products for the entire length of mortgages on the market. Its what happens in almost every other country in Europe- the Irish market is very much an outlier in this respect.
So- look at the borrowing costs for BOI, AIB etc- what price can they get bonds out the door for various time periods. Add 1.5-2% to these- to get consumer rates. This is a reasonable manner of determining likely rates- not the ECB set rates.
The Irish misconception about how the ECB rates govern their lives- really *needs* to be reaccessed.
In Germany a flexible mortgage means your interest rate tracks those of the central bank. I once told a German banker that here in Ireland, flexible means "whatever rate we fancy, in fact it's just gone up again", he could not believe it.
There is, in fact, no such thing as a tracker mortgage in Germany, you can just leave your mortgage flexible, then it follows central bank rates, or, if you hear interest rates are going up, you can ring and say "freeze right now" and it will be frozen at whatever rate it is at right now for up to 10 years.
If I got my mortgage in Germany, I would pay BELOW 2% interest.
Compare that to Irish banks, the robbin' bastards. Ah jaysus, you can have the flexible, but really it's quite deer, not really worth it and we just charge whatever we fancy in fact it's just gone up again, or you can fix it, in which case we whack a few more % on top of it, that champagne at the AGM ain't free, you know? In fact fixed has just gone up as well, begorrah.
Mortgage interest rates in the Irish market are made up in cloud cuckoo land. It's not "what is a fair rate", it's "what is the absolute maximum we can screw out of the people". When you're stuck on a mortgage and have no alternative, turns out it's a lot.
As for lending, the core business of banks is to take money in and (in Ireland) give people nothing for it or charge them money for the privilege. Then to lend them the same money back for vastly overinflated interest rates and charges.
My bank took me for an absolute ride with my mortgage over the last few years and if I had a chance to do them over any which way for as much as possible, I would do it twice. Not in love with the thought of pissing away thousands to those thieves and con men.0 -
dr.fuzzenstein wrote: »In Germany a flexible mortgage means your interest rate tracks those of the central bank. I once told a German banker that here in Ireland, flexible means "whatever rate we fancy, in fact it's just gone up again", he could not believe it.
There is, in fact, no such thing as a tracker mortgage in Germany, you can just leave your mortgage flexible, then it follows central bank rates, or, if you hear interest rates are going up, you can ring and say "freeze right now" and it will be frozen at whatever rate it is at right now for up to 10 years.
If I got my mortgage in Germany, I would pay BELOW 2% interest.
Compare that to Irish banks, the robbin' bastards. Ah jaysus, you can have the flexible, but really it's quite deer, not really worth it and we just charge whatever we fancy in fact it's just gone up again, or you can fix it, in which case we whack a few more % on top of it, that champagne at the AGM ain't free, you know? In fact fixed has just gone up as well, begorrah.
Mortgage interest rates in the Irish market are made up in cloud cuckoo land. It's not "what is a fair rate", it's "what is the absolute maximum we can screw out of the people". When you're stuck on a mortgage and have no alternative, turns out it's a lot.
As for lending, the core business of banks is to take money in and (in Ireland) give people nothing for it or charge them money for the privilege. Then to lend them the same money back for vastly overinflated interest rates and charges.
My bank took me for an absolute ride with my mortgage over the last few years and if I had a chance to do them over any which way for as much as possible, I would do it twice. Not in love with the thought of pissing away thousands to those thieves and con men.
Yes - brother just borrowed at 2% interest rate fixed over 25 years in France (knowing that with this type of mortgage their is a small fee if you want to make a lump sum repayments at some point during the lifetime of the mortgage) ... and I wouldn't say it doesn't exist as I am not absolutely sure, but I am not aware of anyone there with a mortgage whereby the bank can change the rate anytime they please and for any rate they like.
We need better regulation and more certainty about the rates if we don't want to be constantly sitting on a ticking time-bomb that can blow up at any time. I imagine one of the reasons is that Irish banks might fund themselves differently from German and French ones, but I would be curious to know why they can't offer rates which are either guaranteed over the full duration of the mortgage or calculated based on some transparent and publicly available formula.0 -
Isn't it simply down to recouping lost money from trackers? We pay more to pay for the non-profitable loans.0
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El_Dangeroso wrote: »Isn't it simply down to recouping lost money from trackers? We pay more to pay for the non-profitable loans.
And the loans not being paid at all.
Don't get swallowed up in the media hype trying to lump all the blame on trackers. The high SVR's are actually subsidising those who are not paying.0 -
El_Dangeroso wrote: »Isn't it simply down to recouping lost money from trackers? We pay more to pay for the non-profitable loans.
Our banks have the highest mortgage default rates in the world. They borrow at higher costs then equivalent French or German banks because they pose a much higher risk. High Risk = High Reward.0 -
El_Dangeroso wrote: »Isn't it simply down to recouping lost money from trackers? We pay more to pay for the non-profitable loans.And the loans not being paid at all.
Don't get swallowed up in the media hype trying to lump all the blame on trackers. The high SVR's are actually subsidising those who are not paying.Cuddlesworth wrote: »Our banks have the highest mortgage default rates in the world. They borrow at higher costs then equivalent French or German banks because they pose a much higher risk. High Risk = High Reward.
Fully agreed all these things can explain higher rates.
But it doesn't prevent banks from fixing rates or having clear and published formulas borrowers can rely on to know how their rate will be calculated ( rather than "whatever the bank feels like" as we currently have). Obviously the fixed rate or the formula would have to take into account higher borrowing cost and additional financial pressure banks might have due to tracker mortgage or how repossessions work (or not) in Ireland.
My point really is about giving certainty to borrowers and forcing the banks to take responsibility for their bad financial/commercial decisions. Currently they have a free pass to pass the cost of any poor decision they are making to borrowers.0 -
Fully agreed all these things can explain higher rates.
But it doesn't prevent banks from fixing rates or having clear and published formulas borrowers can rely on to know how their rate will be calculated ( rather than "whatever the bank feels like" as we currently have). Obviously the fixed rate or the formula would have to take into account higher borrowing cost and additional financial pressure banks might have due to tracker mortgage or how repossessions work (or not) in Ireland.
My point really is about giving certainty to borrowers and forcing the banks to take responsibility for their bad financial/commercial decisions. Currently they have a free pass to pass the cost of any poor decision they are making to borrowers.
But that would make them accountable, and we can't have that!0 -
My point really is about giving certainty to borrowers and forcing the banks to take responsibility for their bad financial/commercial decisions rather than letting them push the cost to borrowers.
This attitude actually bugs the crap out of me - there were plenty of borrowers wholly responsible for their own bad financial/commercial decisions that aided in the collapse too now the banks are having to deal with the fallout from all sides but the blame is only ever being put on them.
A bit of perspective is often required here as a former front line member of staff in branch banking & commercial lending I can tell you that there were a lot of customers who didn't help themselves and ignored the advice they were given by the banks and leveraged themselves up based on projections and fabulous accounting and tax advice they were given by their best mates sister's brother-in-law who had just qualified as a tax accountant. Guarantees and waivers were being signed all over the place by customers who decided to ignore everything they were told about the risks of intertwining personal and company debts. Personal guarantees from parents who were helping out little Joe & Josephine and then there were the customers who borrowed large amounts of money from the CU, who at the time were not included in the ICB reports so that borrowing could be concealed and wasn't factored into any risk analysis. All of this then came out in the wash when the excrement hit the fan and these customers who knew best when times were good were no longer able to meet all their financial obligations when the employment dried up and hours/wages were being cut all over the place.
But yeah....it's all the banks fault!:rolleyes:0 -
Fully agreed all these things can explain higher rates.
But it doesn't prevent banks from fixing rates or having clear and published formulas borrowers can rely on to know how their rate will be calculated ( rather than "whatever the bank feels like" as we currently have). Obviously the fixed rate or the formula would have to take into account higher borrowing cost and additional financial pressure banks might have due to tracker mortgage or how repossessions work (or not) in Ireland.
My point really is about giving certainty to borrowers and forcing the banks to take responsibility for their bad financial/commercial decisions. Currently they have a free pass to pass the cost of any poor decision they are making to borrowers.
Banks are commercial entity's that exist to make profit. In a functioning market, you could leave the zombie banks and transfer your debt to a better offer. But in our market, other entity's looked at it and decided to not move in. This is because there is no recourse on bad debts, in a country with the worst rate of default in the world. You will not see decent fixed or variable rates until we fix our arrears problem and the system that lead to it in the first place.0 -
The_Morrigan wrote: »This attitude actually bugs the crap out of me - there were plenty of borrowers wholly responsible for their own bad financial/commercial decisions that aided in the collapse too now the banks are having to deal with the fallout from all sides but the blame is only ever being put on them.
A bit of perspective is often required here as a former front line member of staff in branch banking & commercial lending I can tell you that there were a lot of customers who didn't help themselves and ignored the advice they were given by the banks and leveraged themselves up based on projections and fabulous accounting and tax advice they were given by their best mates sister's brother-in-law who had just qualified as a tax accountant. Guarantees and waivers were being signed all over the place by customers who decided to ignore everything they were told about the risks of intertwining personal and company debts. Personal guarantees from parents who were helping out little Joe & Josephine and then there were the customers who borrowed large amounts of money from the CU, who at the time were not included in the ICB reports so that borrowing could be concealed and wasn't factored into any risk analysis. All of this then came out in the wash when the excrement hit the fan and these customers who knew best when times were good were no longer able to meet all their financial obligations when the employment dried up and hours/wages were being cut all over the place.
But yeah....it's all the banks fault!:rolleyes:
Don't get me wrong, I am certainly not saying it is all the bank's fault and not excusing people who borrowed more than what they could afford - definitely not.
But look at the way banks were offering tracker mortgages which now aren't generating enough profit and used to justify the fact that variable rates are higher. Is that any borrowers fault or is that the banks thinking "nothing can go wrong we'll make loads of money" and not thinking of long term consequences?
Currently banks are not acknowledge to borrowers with regards to their funding models and and have no obligation or transparency (whereby most other European banks would be). They have a free pass to push any unforeseen cost to borrowers even though it is due to their own incompetency.
If you get a mortgage today and in 2 years it happens that Irish banks have all made poor investments which have nothing to do with you but are costing them a lot - they can increase your interest rate to cover the losses.0 -
262K (300 - 38) @ 7.3 for 30 years = repayments of 1796.I'd say it's far beyond a "decent stress test".
For example, by my count (which admittedly could be wrong) a 30year 260k mortgage would be about 1700 a month at about 7.3% interest. Using 260k as this was the 38k / 300k purchase price mortgage mentioned in the Irish Times figures above.
Much less than this 1500 saving (as an example figure) plus rent costs (which in Dublin is probably going to be another 1200 or above for the average person).
Though I am open to correction on my figures.
So taking this as your stressed figure, you would have 596 a month extra over and beyond your 1200. At that rate you would have the full deposit in just over 5 years. That is assuming that you cant afford to save anything over the stressed figure of 1796, if this is the case I'd argue you didn't stress yourself enough.
5 years of deposit saving is not a lot tbh, lesson here is to start early
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Don't get me wrong, I am certainly not saying it is all the bank's fault and not excusing people who borrowed more than what they could afford - definitely not.
But look at the way banks were offering tracker mortgages which are now generating enough profit and justifying the fact that variable rates are now higher. Is that any borrowers fault or is that the banks thinking "nothing can go wrong we'll make loads of money" and not thinking of long term consequences?
Currently banks are not acknowledge to borrowers with regards to their funding models and and have no obligation or transparency (whereby most other European banks would be). They have a free pass to push any unforeseen cost to borrowers even though it is due to their own incompetency.
I don't think it's as black and white as you have laid out above. It's not all about the cost of borrowing or about making lots of money (albeit they are not charities and profit is something they all desire). It's about balancing the books between cash and borrowings it was a fine line for years and then in 2008/2009 there was a change to capital requirements for all financial institutions. I was gone from retail banking into international banking at that point so I've no idea how that was impacting the likes of BOI, AIB. However, that is the same time that all the trackers were pulled from the markets and the same time that all the UK banks pulled out. I recall my Dad mentioning that the national banks were trying to give trackers and lower rates to win business from the likes of Bank of Scotland, who had massive international financial houses behind them and massive pots of reserves to rely on and that way of borrowing was just not going to be sustainable for the smaller players for any length of time.
With the collapse you had defaulters who were not repaying their loans, which meant that the banks had to start pulling capital from other places to cover the stop in cash flow from borrowers which had an impact on this balancing of cash reserves vs lending. There are many many intricate formulas and rules in relation to this, I recall different rules for any lending facilities that were for less than 300 days and different capital requirements. So you had lenders offering 9 month credit facilities that must be either renewed on day 269 for another less than a year period or repaid in full. It's been a legal nightmare and with lending rules ever changing and the rise in defaulters it's never going to be a nice easy explanation of how years and years of lending under various rules now are dealt with under the scope of current rules, regulations and laws.0 -
Fully agreed all these things can explain higher rates.
But it doesn't prevent banks from fixing rates or having clear and published formulas borrowers can rely on to know how their rate will be calculated ( rather than "whatever the bank feels like" as we currently have). Obviously the fixed rate or the formula would have to take into account higher borrowing cost and additional financial pressure banks might have due to tracker mortgage or how repossessions work (or not) in Ireland.
My point really is about giving certainty to borrowers and forcing the banks to take responsibility for their bad financial/commercial decisions. Currently they have a free pass to pass the cost of any poor decision they are making to borrowers.
Well banks are businesses and as such, they have a right to charge whatever they like. What should keep them in check is competition with other banks but we don't have that because:
1. all the other banks are in the same boat as them with crippling arrears
2. new entrants won't come into the market because they can't price for risk if they have no chance of repossessing the security if the loan goes bad0 -
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dr.fuzzenstein wrote: »Yes, that is exactly what was said. With 60k I should be able to buy a house in Dalkey beside Bono and Gaybo :rolleyes:
You refuted the affordability in Dublin by giving an example of a small one bed flat on the outskirts of Berlin which was 47 - 53 mins from Alexanderplatz by s-bahn and u-bahn.
Where do you suggest (naming locations) that a couple earning 60k should be able to buy, if not Dalkey?0 -
The_Morrigan wrote: »This attitude actually bugs the crap out of me - there were plenty of borrowers wholly responsible for their own bad financial/commercial decisions that aided in the collapse too now the banks are having to deal with the fallout from all sides but the blame is only ever being put on them.
A bit of perspective is often required here as a former front line member of staff in branch banking & commercial lending I can tell you that there were a lot of customers who didn't help themselves and ignored the advice they were given by the banks and leveraged themselves up based on projections and fabulous accounting and tax advice they were given by their best mates sister's brother-in-law who had just qualified as a tax accountant. Guarantees and waivers were being signed all over the place by customers who decided to ignore everything they were told about the risks of intertwining personal and company debts. Personal guarantees from parents who were helping out little Joe & Josephine and then there were the customers who borrowed large amounts of money from the CU, who at the time were not included in the ICB reports so that borrowing could be concealed and wasn't factored into any risk analysis. All of this then came out in the wash when the excrement hit the fan and these customers who knew best when times were good were no longer able to meet all their financial obligations when the employment dried up and hours/wages were being cut all over the place.
But yeah....it's all the banks fault!:rolleyes:
I agree completely that ultimate responsibility lies with the borrower, but in my experience, local bank managers and lenders were vociferous cheerleaders. Say what you like, but there are many many instances of borrowers being wined and dined and protocols/internal controls being breached in all manner of ways in order to win business (I think Sheehy mentioned as much last week).
I spent time auditing loan decisions and in my experience, the guarantor for little Joe/Josephine was very actively pursued/suggested by local banking staff in order that little Joe/Josephine could buy that apartment in Dublin (sure with the cost of student accommodation in Dublin, didn't it make sense).
As you also know and indicative of the times we were living in, bank loan staff weren't the most efficient in ensuring that those guarantees were always current or that the bank actually had security etc.
Again, I do agree completely, the banks are not to blame for people taking out loans, that responsibility lies entirely with the borrower, but to suggest that bank staff offered advice against certain decisions, but that borrowers were still able to access funds from that institution regardless is a new one to me.
You may have some experience of that, but I would suggest that it was very much the exception.0 -
Happened all the time. The on paper application that passed with flying colors due to CU loans looking like large savings or putting the family home up against commercial lending. Staff would always have to advise independent legal or tax advice be sought, the amount of times that was ignored was the problem. If a person signed a declaration and provided all the supporting docs against a loan then a computer spat out an answer. When I was there discretionary lending at branch level was long gone and everything was done via loan systems in head offices or support centres.I agree completely that ultimate responsibility lies with the borrower, but in my experience, local bank managers and lenders were vociferous cheerleaders. Say what you like, but there are many many instances of borrowers being wined and dined and protocols/internal controls being breached in all manner of ways in order to win business (I think Sheehy mentioned as much last week).
I spent time auditing loan decisions and in my experience, the guarantor for little Joe/Josephine was very actively pursued/suggested by local banking staff in order that little Joe/Josephine could buy that apartment in Dublin (sure with the cost of student accommodation in Dublin, didn't it make sense).
As you also know and indicative of the times we were living in, bank loan staff weren't the most efficient in ensuring that those guarantees were always current or that the bank actually had security etc.
Again, I do agree completely, the banks are not to blame for people taking out loans, that responsibility lies entirely with the borrower, but to suggest that bank staff offered advice against certain decisions, but that borrowers were still able to access funds from that institution regardless is a new one to me.
You may have some experience of that, but I would suggest that it was very much the exception.
As for wining and dining in the five years I was there I never experienced that in my region and we had big commercial clients.0 -
In fairness CU loans passing as savings aren't/weren't too difficult to figure out and if the computer still said yes after being told that personal assets were being set against commercial lending, then maybe the software should have been looked at.The_Morrigan wrote: »Happened all the time. The on paper application that passed with flying colors due to CU loans looking like large savings or putting the family home up against commercial lending. Staff would always have to advise independent legal or tax advice be sought, the amount of times that was ignored was the problem. If a person signed a declaration and provided all the supporting docs against a loan then a computer spat out an answer. When I was there discretionary lending at branch level was long gone and everything was done via loan systems in head offices or support centres.
As for wining and dining in the five years I was there I never experienced that in my region and we had big commercial clients.
I was long gone by the end of the Tiger, but anecdotally I heard constant streams of tales of people being encouraged by branch staff to leverage up, there was a certainty that property prices could not fall. The staff genuinely believed that they were acting in the best interests of the would be borrower, the attitude was that it was almost sinful to have assets (including equity in family homes) sit there doing nothing, when huge returns were available. Of course, lip service would be paid to obtaining advice, but with the group think present in the country, it would have been difficult to obtain negative advice (bertie had very specific advice for such people).
As for the wining and dining, it was particularly excessive with the large developers, but it went on at all levels:
"THE COUNTRY's biggest bank has defended its plan to take 80 clients on an all-expenses paid trip to the Ryder Cup in the US this week, writes Paul Melia.
Yesterday, it emerged that AIB had chartered a plane to take customers to Valhalla Golf Club in Kentucky, where they will watch Team Europe attempt to retain its title.
The move comes as the bank confirmed it planned to regrade the accounts of ordinary customers because of the economic downturn, which could lead to some having to pay higher interest charges on their accounts.
Yesterday, a spokesman said the junket was just "corporate entertainment", adding that the bank had taken clients to the Ryder Cup in the past.
He could not confirm that the trip would cost €1.5m -- or over €18,000 per customer -- as reported in a Sunday newspaper."
http://m.independent.ie/irish-news/golf-jolly-for-clients-will-cost-aib-1m-26476747.html
"Anglo’s spending on client entertainment and staff parties are detailed in a new book by Irish Timesjournalist Simon Carswell, Anglo Republic: Inside the Bank that Broke Ireland, published on Monday.
In the year before nationalisation, the bank spent vast sums of money bringing clients to sporting events and paying for match tickets.
During the year Anglo paid €21,000 for Manchester United tickets, €19,000 for Chelsea season tickets, €42,000 for tickets to Ireland’s home rugby games against New Zealand and Argentina and €9,000 taking US clients to see the Boston Red Sox baseball team.
The bank also paid €140,000 for 10-year premium rugby tickets for the Aviva Stadium in Dublin.
In June 2008 Anglo flew some of its biggest customers in the US to Ireland for the bank’s annual golf trip to play courses along the west coast.
The flights for the trip cost €104,000 and hotel accommodation €103,000. The bank spent €7,000 on silver cufflinks specially made by a Dublin jewellery designer for the clients to commemorate the trip.
Golf was an important means for Anglo to entertain clients and attract new business to the bank.
As well as spending €1.38 million on golf paraphernalia, including more than €200,000 on golf balls, between 2006 and 2009, Anglo spent €300,000 in 2008 sponsoring a golf tournament for businesses interested in entering a team. The bank announced English golfer Lee Westwood as “a brand ambassador” to promote the tournament, which was played at some of the best courses in Ireland and Britain."
http://www.irishtimes.com/news/this-is-anglo-so-there-is-only-one-thing-to-do-party-1.589487
Again, not having a go at you, just putting it out there that banks were pushing lending aggressively (in my opinion), because, bank staff were as caught up in the group think as the rest of the country. It happened at all levels, ftb's were encouraged to factor in rented rooms in their proposed purchases, parental guarantees were often suggested, bonuses and overtime were called guaranteed bonus/overtime payments.
At the top level rates were negotiated down to barely profitable margins, non recourse loans became more prevalent, PG's were for fractions of overall liabilities and often lapsed in any case.
Having said all that, the borrower has the ultimate responsibility.0 -
I'd say it's far beyond a "decent stress test".
For example, by my count (which admittedly could be wrong) a 30year 260k mortgage would be about 1700 a month at about 7.3% interest. Using 260k as this was the 38k / 300k purchase price mortgage mentioned in the Irish Times figures above.
Much less than this 1500 saving (as an example figure) plus rent costs (which in Dublin is probably going to be another 1200 or above for the average person).
Though I am open to correction on my figures.
The bank want a deposit from each buyer in order to protect themselves (and the buyer) from unexpected financial events in the first couple of years of the mortgage - job losses, economic downturns, house price collapses. Given that they're hedging against you losing your job, your current savings level simply isn't relevant to the deposit.0 -
Other countrys have good regulation ,strict rules on borrowing for first time buyers ,
so they did not go thru the boom bust ireland did in 2007.
ITS evident if theres not strict regulation of bank lending ,
when theres a bust the taxpayer has to pay the cost of cleaning up the mess.
Meanwhile in the boom ,the bankers get to keep their bonus,es .0 -
Other countrys have good regulation ,strict rules on borrowing for first time buyers ,
so they did not go thru the boom bust ireland did in 2007.
ITS evident if theres not strict regulation of bank lending ,
when theres a bust the taxpayer has to pay the cost of cleaning up the mess.
Meanwhile in the boom ,the bankers get to keep their bonus,es .
Generally correct but one small point on the above.
FTB's are apparently the least likely market segment to default on their loans. This comes from Honohan's statement to the dail re the new mortgage rules.
The people defaulting on loans are mostly trader uppers or BTL.0 -
Generally correct but one small point on the above.
FTB's are apparently the least likely market segment to default on their loans. This comes from Honohan's statement to the dail re the new mortgage rules.
The people defaulting on loans are mostly trader uppers or BTL.
Haven't read this report: Do first time buyers default less?
Implications for macro-prudential policy
But I suspect this could be "research" where, bowing to political pressure due to the public outcry over "pricing FTB out of market", the conclusion was decided first and then the figures that fit the conclusion were used.
e.g. if the figures include BTL mortgages in with non-FTB figures. In this case the comparison would be completely invalid. Lots of other less extreme ways to pick figures that support a pre-defined hypothesis too.0 -
In other countries you get special savings contracts when you're saving to buy a house, Bausparkvertrag to name one.
These are supported with incentives by the government.
In Ireland it's "Oh look, you're trying to save money. let me pay you less than 1% interest and a third of that will be stolen by the state, you'll be sorry you ever tried!"
The problem is, in other countries the thinking is "We have to properly regulate this to make it easy for everyone, but within very clearly defined parameters so we all know what we're doing"
In Ireland it is "Oh no, they're buying houses! Quick, let's whip up some legislation to make it difficult and expensive for everyone, to punish them!"
The Irish don't do incentives, they do tax hammer and ban hammer, everything else cannot be comprehended.0 -
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dr.fuzzenstein wrote: »In other countries you get special savings contracts when you're saving to buy a house, Bausparkvertrag to name one.
These are supported with incentives by the government.
In Ireland it's "Oh look, you're trying to save money. let me pay you less than 1% interest and a third of that will be stolen by the state, you'll be sorry you ever tried!"
The problem is, in other countries the thinking is "We have to properly regulate this to make it easy for everyone, but within very clearly defined parameters so we all know what we're doing"
In Ireland it is "Oh no, they're buying houses! Quick, let's whip up some legislation to make it difficult and expensive for everyone, to punish them!"
The Irish don't do incentives, they do tax hammer and ban hammer, everything else cannot be comprehended.
You don't pay DIRT on savings for a house.0
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