Central Bank to limit amount banks lend for home purchase

Greyian

Deleted User wrote: »

Explain that to me? How did FTBs and movers borrow less on average but they say the average mortgage is up?
Genuine question. I don't understand it.

Each group's average was lower, but if the number of movers increased more than the number of FTBs, the overall average would shift towards the movers.

Example:
There are 10 mortgages in Period A.
First time buyers average mortgage is €100,000, and there are 5 of them.
Movers average mortgage is €200,000, and there are 5 of them.

This gives us a total of 10 mortgages and €1.5m borrowed, so €150,000 average mortgage size.

In Period B, there are 15 mortgages.
First time buyers average mortgage decreases to €95,000, and there are still 5 of them.
Movers average mortgage decreases to €190,000, but there are now 10 of them.

This gives us a total of 15 mortgages, with €2.375m borrowed. This would give us an average overall mortgage of €158333.33.

So despite the fact that the average FTB mortgage has decreased (by 5%), and the average mover mortgage has decreased (by 5%), the average mortgage has increased (by 5.5%).
Why? Because there are more mover mortgages relative to FTB mortgages.


Edit: It also shows how these figures are often twisted by the media. A first time buyer would, on average, have drawn down a lower mortgage in Q1 2015 than they did in Q4 2014 (or Q3 2014 for that matter also). A mover would, on average, have also drawn down a lower mortgage in Q1 2015 than in Q4 2014 (or Q3 2014). But the media don't want to highlight that fact, they want to once again push the story that prices are increasing, because higher prices => more advertising => more revenue for the media.

Thanks - much appreciated! Makes sense now

johnp001

Greyian wrote: »

It also shows how these figures are often twisted by the media. A first time buyer would, on average, have drawn down a lower mortgage in Q1 2015 than they did in Q4 2014 (or Q3 2014 for that matter also). A mover would, on average, have also drawn down a lower mortgage in Q1 2015 than in Q4 2014 (or Q3 2014). But the media don't want to highlight that fact, they want to once again push the story that prices are increasing, because higher prices => more advertising => more revenue for the media.

Thanks for posting that detailed explanation of the breakdown in figures.

Another resounding example of why we should always check the figures ourselves where possible before believing headlines written by a media with a massive property pumping agenda.

It is remarkable. I'm interested in this topic and (I would have thought) relatively numerically literate but all I saw was mortgages 'surging' and the average size of mortgages rising 5%+.

The BPFI report itself offers a fairly positive spin.

gaius c

johnp001
Think you're better off comparing Q1 2015 to Q1 2014 and not the last 2 quarters of 2014.

johnp001

gaius c wrote: »

johnp001
Think you're better off comparing Q1 2015 to Q1 2014 and not the last 2 quarters of 2014.

Please explain why?
Loan volumes are certainly seasonal but I would have thought average loan values drawn down by FTB or Mover would be relatively consistent.

gaius c

johnp001 wrote: »

Please explain why?
Loan volumes are certainly seasonal but I would have thought average loan values drawn down by FTB or Mover would be relatively consistent.

Yeah, fair enough. Had a re-think on it.

jaffa20

ec18 wrote: »

Has anyone noticed that the online how much can i borrow calculators are still using 4.5 times gross salary? seems a bit strange 4/5 months into the new rules?

Which ones are you talking about? I get around 4.5 times with PTSB but not the others online. Maybe depends on salary...

johnp001

Mortgage moves contradict Irish Central Bank policy

Karl Deeter not in favour of government intervention on mortgage interest rates...

“You’ve got to ask yourself, where’s the joined-up thinking in it? There doesn’t have to be joined-up thinking, you can just have random chaos but at least call it what it is.”

ec18

jaffa20 wrote: »

Which ones are you talking about? I get around 4.5 times with PTSB but not the others online. Maybe depends on salary...

I tried with ulster bank, KBC, BOI and AIB

johnp001

Mortgage rules ‘put ownership of homes beyond reach of many’

Mortgage broker service provider shows no comprehension that prices are in any way related to availability of credit.

A better headline would perhaps be:
"Mortgage rules put exorbitant, credit fuelled selling prices beyond reach of property owners"

Paraphrasing the article... wrote:

... almost half of potential home buyers home sellers will be stopped in their tracks from securing a home loan an inflated sale price in the next three years because the Central Bank rules are too onerous.

Michael D Not Higgins

johnp001 wrote: »

Mortgage moves contradict Irish Central Bank policy

Karl Deeter not in favour of government intervention on mortgage interest rates...

Sometimes with Karl Deeter, you have to question his motives. Is he arguing against this because it hurts his day job? He is one of the most invested and outspoken in the debates around house prices, mortgages, etc.

fret_wimp2

johnp001 wrote: »

Mortgage rules ‘put ownership of homes beyond reach of many’

Mortgage broker service provider shows no comprehension that prices are in any way related to availability of credit.

A better headline would perhaps be:
"Mortgage rules put exorbitant, credit fuelled selling prices beyond reach of property owners"

#This

Issue is not the rules.
It was a bad idea to borrow many multiples of your household annual salary before the rules. its why so many people are in arrears.
Its still a bad idea, but luckily people are protected from themselves somewhat by the new rules.
If the asking prices are many multiples of your household salary, then you cant afford that mortgage. So the problem is not the rules, its the boom time prices based on a time when money was being thrown around.

Very simplistic view but if the market functioned correctly heres a timeline of how it should have worked:

-High House prices fueled by lots of easily available credit, lots of movement in the market.

-Rules put in place to prevent over-borrowing, majority cant afford massive asking prices now.

-Property stops selling.

-Sellers either:

a. Leave their house on the market indefinitely hoping some fool comes along.
b.Accept the house isnt worth what it was in 2008, lower their prices to realistic levels and hopefully make the sale

gaius c

Michael D Not Higgins wrote: »

Sometimes with Karl Deeter, you have to question his motives. Is he arguing against this because it hurts his day job? He is one of the most invested and outspoken in the debates around house prices, mortgages, etc.

I like Karl and he does make some very good points but you do need to apply a good filter to his statements.

johnp001

fret_wimp2 wrote: »

#This

Issue is not the rules.
...

-Sellers either:

a. Leave their house on the market indefinitely hoping some fool comes along.
b.Accept the house isnt worth what it was in 2008, lower their prices to realistic levels and hopefully make the sale

Wholeheartedly agree with all this.
Only question is how long the stand-off where sellers refuse to accept that the hypothetical fortune their house was once worth on paper is now no longer attainable as a selling price will be?
I think that the sellers who accept this soonest will probably lose the least...

Michael D Not Higgins wrote: »

Sometimes with Karl Deeter, you have to question his motives. Is he arguing against this because it hurts his day job? He is one of the most invested and outspoken in the debates around house prices, mortgages, etc.

I question everyone's motives. I'm not sure exactly how the moves that KD is objecting to would significantly impinge on his livelihood though.
I agree with him that the having the government continually meddling without any sort of coherence is a negative for everyone.

Balmed Out

Apparently aib, ulster, boi, kbc have agreed with Michael noonan to look at reducing standard variable rates and introduce simpler options by July.

As for Karl deeter, I think he used to post here. He often talks a lot of sense though I dont always agree and he is obviously somewhat biased.

Bob24

Balmed Out wrote: »

Apparently aib, ulster, boi, kbc have agreed with Michael noonan to look at reducing standard variable rates and introduce simpler options by July.

As for Karl deeter, I think he used to post here. He often talks a lot of sense though I dont always agree and he is obviously somewhat biased.

Yes just saw that here.

Wondering what he offered them in exchange and is not telling us (someone has to pay for this).

gaius c

Balmed Out wrote: »

Apparently aib, ulster, boi, kbc have agreed with Michael noonan to look at reducing standard variable rates and introduce simpler options by July.

As for Karl deeter, I think he used to post here. He often talks a lot of sense though I dont always agree and he is obviously somewhat biased.

No. Used to post on the pin.

seamus

Reduction in interest rates. Just in time to save the property market. Yeesh, weird times ahead.

Bob24

seamus wrote: »

Just in time to save the property market.

And the elections :-)

dr.fuzzenstein

Balmed Out wrote: »

Apparently aib, ulster, boi, kbc have agreed with Michael noonan to look at reducing standard variable rates and introduce simpler options by July.

As for Karl deeter, I think he used to post here. He often talks a lot of sense though I dont always agree and he is obviously somewhat biased.

Anyone know if EBS will be bringing down their rates? (he asked for no particular reason)

edit:
Don't see them in the link, but they are part of AIB, so maybe...
http://www.rte.ie/news/business/2015/0522/702949-michael-mcgrath-mortgage-rates/

AlmightyCushion

Bob24 wrote: »

Yes just saw that here.

Wondering what he offered them in exchange and is not telling us (someone has to pay for this).

It's there in the article. There's a bill currently in the seanad that gives the central bank the option to reduce interest rates. He also said that if they don't reduce interest rates he could bring in a large bank levy in the next budget.

dr.fuzzenstein

AlmightyCushion wrote: »

It's there in the article. There's a bill currently in the seanad that gives the central bank the option to reduce interest rates. He also said that if they don't reduce interest rates he could bring in a large bank levy in the next budget.

I fail to see the threat to the banks in the larger levy. They will take 2 seconds to pass it on to the consumer and go back to their smoked lobster lunch.

Bob24

AlmightyCushion wrote: »

It's there in the article. There's a bill currently in the seanad that gives the central bank the option to reduce interest rates. He also said that if they don't reduce interest rates he could bring in a large bank levy in the next budget.

I think these are empty threats and he is just posturing to show his voters he is fighting bankers. If the central bank was to impose lower rates or the government to levy fines off the banks, who would that hurt? The banks' shareholders. Who is the largest (by far) shareholder? The government.

At the end of the day the only ways they can reduce interest rates is to offer them more taxpayer's money or to let them be more agressive with bad payers so that other mortgage holders don't have to subsidise them. I think either he offered them some of our tax money now, or he promised them they will be allowed to be more aggressive with people in arrears if FG wins the next election (I think that second option would be a win-win situation for FG and the banks).

AlmightyCushion

Bob24 wrote: »

I think these are empty threats and he is just posturing to show his voters he is fighting bankers. If the central bank was to impose lower rates or the government to levy fines off the banks, who would that hurt? The banks' shareholders. Who is the largest (by far) shareholder? The government.

At the end of the day the only ways they can reduce interest rates is to offer them more taxpayer's money or to let them be more agressive with bad payers so that other mortgage holders don't have to subsidise them. I think either he offered them some of our tax money now, or he promised them they will be allowed to be more aggressive with people in arrears if FG wins the next election (I think that second option would be a win-win situation for FG and the banks).

I can't see the government giving them any more money. Political suicide if they did, the opposition would have a field day. They brought in a bank levy in 2013 when the state had a bigger share of the banks than they do today. If they brought one in back then, they could easily do it again.

Bob24

AlmightyCushion wrote: »

I can't see the government giving them any more money. Political suicide if they did, the opposition would have a field day. They brought in a bank levy in 2013 when the state had a bigger share of the banks than they do today. If they brought one in back then, they could easily do it again.

Yes they definitely won't give them anything in a direct manner, agreed. But telling them to reduce rates and not changing anything else (ie reducing their profits, or increasing their losses for some of them) is pretty much giving them tax money since the government is financially involved in most of them.

johnp001

OECD calls for further macro-prudential measures be used to prevent exposure to a new bubble
Irish house price rises reminiscent of bubble, says OECD

“Further macro-prudential tools should be used, if necessary, to prevent investors becoming excessively exposed,”

Does "excessively exposed" equal "negative equity" in this context?
i.e. does the OECD see a danger of price drops in excess of the new deposit limits?

Michael D Not Higgins

johnp001 wrote: »

OECD calls for further macro-prudential measures be used to prevent exposure to a new bubble
Irish house price rises reminiscent of bubble, says OECD


Does "excessively exposed" equal "negative equity" in this context?
i.e. does the OECD see a danger of price drops in excess of the new deposit limits?

If the market were to keep at the pace it has taken recently (although I don't believe it will when the LTI/LTV limits properly kick in) then the bubble would easily outstrip the 10-20% deposit within a couple of years.

I think the 'if necessary' comment is the most salient aspect. It all depends on the progress of the housing market.

gaius c

johnp001 wrote: »

OECD calls for further macro-prudential measures be used to prevent exposure to a new bubble
Irish house price rises reminiscent of bubble, says OECD


Does "excessively exposed" equal "negative equity" in this context?
i.e. does the OECD see a danger of price drops in excess of the new deposit limits?

Personally I think that the OECD might be looking at either lagging or out-of-date data because the PPR shows that the market peaked last year with a considerable reverse last autumn/winter and then broadly flat-ish since.

Then the CB rules got brought in and we haven't really seen them take effect yet as 10% deposit AIP's haven't run out yet.

Give it another few months and see how things are going before making more changes.

leinsterdude

four houses sold in my area, in a matter of two weeks, all well priced, worth what they sold for, stocks very low now, this is in Kilcullen, glad to see it to be honest, Im sure they do represent good value though, if you go 8 miles to Naas, the prices are far higher and not moving quite as fast.