Central Bank to limit amount banks lend for home purchase

Greyian

Larry Wildman wrote: »

Interest rates are going down, not up.

They are excellent candidates (and have been told as much).

And the value of your house/apartment can only ever go up in value, right?

makeorbrake

assetcolum wrote: »

Exactly , and they would be the same people who (if sh!t hit the fan) would turn around and blame the banks for allowing them to borrow recklessly

If these measures had been in play 8 years ago, I'd probably have been able to buy a property for 30% less than I did. Furthermore, I'd probably have been able to buy where I really needed to locate to rather than out in the boonies.


I know that people that had plans made and were ready to buy must feel a bit frustrated by this (assuming its actually going to be implemented). However, if they can stand back and look at the bigger picture, its likely to put them in a far better position in the long run (assuming there's no other meddling in next weeks budget turning things back in the opposite direction again).

El_Dangeroso

Greyian wrote: »

And the value of your house/apartment can only ever go up in value, right?

Had to check my calendar there to make sure it wasn't 2006. Some attitudes on this thread re-enforce the idea that people really need to be protected from themselves.

Larry Wildman

Greyian wrote: »

And the value of your house/apartment can only ever go up in value, right?

The value of a property is only relevant if you have to move.

Someone buying their long term home shouldn't be concerned about negative equity because time will take care of it.

assetcolum

Larry Wildman wrote: »

I don't believe you.

Your take home pay is €2,700 a month.

How exactly have you saved €100k (unless you're living at home).

I work overseas for the past couple of years , accommodation/food paid for

I have been making around 25-45k since i was 19 so nearly 10 years at that money it is not very hard to save 10k per year

Greyian

Larry Wildman wrote: »

The value of a property is only relevant if you have to move.

Someone buying their long term home shouldn't be concerned about negative equity because time will take care of it.

It seems that what I meant has gone completely over your head.

In the mid-2000s, people said the value of your property could only ever go up.;

In 2014, you're saying interest rates are going down, not up. Will that still be true in 2019 or 2024? Because that's still relatively short term if you're taking out a mortgage.

makeorbrake

Larry Wildman wrote: »

The value of a property is only relevant if you have to move.

Someone buying their long term home shouldn't be concerned about negative equity because time will take care of it.

That's an oversimplification, Larry. If we follow through to the full extent of that logic, then there is never an unreasonable price for a property (so long as there is a lender out there willing to lend that amount).

My property is currently worth 45% of what I paid for it. Now whilst I agree that time will take care of it so long as I stay put and whilst I'm quite comfortable notwithstanding that (I didn't borrow more than I could repay and I've got the cheapest home loan rate that was possible), it's still not an intelligent purchase and it's not a situation that you'd consciously commit to.

Circumstances change - and you never know completely how circumstances will unfold. Ideally, I could do with moving - but in line with your mantra (the fullness of time takes care of negative equity) and due to the fact that I'd have to relinquish a tracker of ecb+0.59%, I won't. However, that doesn't come without cost - like 10 hours spent commuting every week - and the associated costs of that.


It's incredulous that people are of this belief only 8 years after the collapse. It was said that it would happen again - but unlikely to be repeated by the very same generation. Just goes to prove that the biggest variable in any given scenario is people...

mirrorwall14

assetcolum wrote: »

I work overseas for the past couple of years , accommodation/food paid for

I have been making around 25-45k since i was 19 so nearly 10 years at that money it is not very hard to save 10k per year

Hang on that's not a normal situation at all, accomodation and food in Ireland is a fairly substantial chunk of monthly outgoings, particularly if you are in Dublin!

P. Breathnach

ffactj wrote: »

It will cool prices at the expense of the FTB....

The purpose of the proposed regulations is to restrict demand. They won't have that effect unless at least some people are put in a position where the amount they can bid is reduced. Yes, it's true that FTBs will suffer the impact more than cash buyers. But seriously, what else can be done? You can't exclude cash buyers from the market.

assetcolum wrote: »

Not necessarily, for instance if i was to put 120k down payment on a 190-200k house my mortgage would work out at around 400E per month

That post illustrates an important point: people pay at least as much attention to expected monthly repayments as they do to the headline price. When mortgage interest rates fall, prices rise to reflect that. When interest rates rise, housing prices fall.

Currently, loans are abnormally cheap. People who borrow heavily at current rates could be wiped out by an interest rate increase - unable to service their loan, and unable to sell the property for anything like the price they paid for it. I think significant interest rate rises are unlikely in the short-to-medium term, but a real danger in the medium-to-long term.

Larry Wildman

assetcolum wrote: »

I work overseas for the past couple of years , accommodation/food paid for

I have been making around 25-45k since i was 19 so nearly 10 years at that money it is not very hard to save 10k per year

So your situation is completely irrelevant because your accomodation and food were being covered by someone else!

You probably enjoyed more favourable tax treatment too.

Larry Wildman

Greyian wrote: »

It seems that what I meant has gone completely over your head.

In the mid-2000s, people said the value of your property could only ever go up.;

In 2014, you're saying interest rates are going down, not up. Will that still be true in 2019 or 2024? Because that's still relatively short term if you're taking out a mortgage.

And in 2019 or 2024 what will have happened to the couple's incomes?

And the four figure sum that they're paying every month for creche fees? 'Cause creche fees go on forever, yeah?

ct5amr2ig1nfhp

Just reading an article in the Independent - no surprise that developers are at all impressed by the news. link

assetcolum

Larry Wildman wrote: »

So your situation is completely irrelevant because your accomodation and food were being covered by someone else!

You probably enjoyed more favourable tax treatment too.

How is my situation irrelevant, i still worked ,paid tax and saved up 100 thousand Euro of hard earned money since i was 16 years old!!!!! and now i am in the position of being a FTB

How does that make my situation irrelevant

Again your posts on this thread speaks volumes

Larry Wildman

assetcolum wrote: »

How is my situation irrelevant, i still worked ,paid tax and saved up 100 thousand Euro of hard earned money since i was 16 years old!!!!! and now i am in the position of being a FTB

How does that make my situation irrelevant

Again your posts on this thread speaks volumes

You're looking for a pat on the back for saving €100k but your accomodation and food costs were paid for by someone else.

So your circumstances are irrelevant because they're different to those of the majority of people.

If I still lived with my parents, I could probably save thousands a month.

Villa05

Strongly in favour of this measure and a little surprised at the many prospective FTB's who are highly critical.

Prices in Dublin are around 2002/2003 levels if I'm not mistaken. Imagine if these measures were put in place then. How much suffering would have been avoided.

It is very hard to contemplate how people on high salaries who must have a very high education attainment cannot see the big picture and how these measures not only benefit society as a whole but also themselves in their own personal circumstance.

Yes there are other issues, but this one is most definitely a change for the better.

Crazy stuff, but proof if ever it was needed that Irish people have an unhealthy addiction to property and they need protection from that addiction. Well done Patrick Honohan

chris85

Belle Poor Surfing wrote: »

Just reading an article in the Independent - no surprise that developers are at all impressed by the news. link

Obviously they wont be happy but no concern for them. I would like more properties on the market with the developments support by local councils. I am not saying a construction bubble like before but planned areas for growth supported by new schools and infrastructure needed with good quality houses.

This can help support sustainable house prices and take pressure off the rental market. Win win!

Anyone think we will see any moves next week in the Budget to support sustainable housing developments and sensible lending (I do not believe max 80% LTV ratio is sensible)

Also will we see a new wave of properties in negative equity. People who bought in last 6 months buying at 90% LTV and price could drop by more than 10%? This would be a strange turn in events.

Larry Wildman

Villa05 wrote: »

Strongly in favour of this measure and a little surprised at the many prospective FTB's who are highly critical.

Prices in Dublin are around 2002/2003 levels if I'm not mistaken. Imagine if these measures were put in place then. How much suffering would have been avoided.

It is very hard to contemplate how people on high salaries who must have a very high education attainment cannot see the big picture and how these measures not only benefit society as a whole but also themselves in their own personal circumstance.

Yes there are other issues, but this one is most definitely a change for the better.

Crazy stuff, but proof if ever it was needed that Irish people have an unhealthy addiction to property and they need protection from that addiction. Well done Patrick Honohan

What suffering would be avoided?

Do you really think that people being able to borrow 90% of the purchase price of their home caused Ireland's economic collapse.

chris85

Villa05 wrote: »

Strongly in favour of this measure and a little surprised at the many prospective FTB's who are highly critical.

Prices in Dublin are around 2002/2003 levels if I'm not mistaken. Imagine if these measures were put in place then. How much suffering would have been avoided.

It is very hard to contemplate how people on high salaries who must have a very high education attainment cannot see the big picture and how these measures not only benefit society as a whole but also themselves in their own personal circumstance.

Yes there are other issues, but this one is most definitely a change for the better.

Crazy stuff, but proof if ever it was needed that Irish people have an unhealthy addiction to property and they need protection from that addiction. Well done Patrick Honohan

Was different situation then. People were borrowing 10 times salary with LTV ratios of 95%+ and in a lot of case above 100% unfortunately. Lending was wreckless with bonuses/overtimes being taken into account for salary which is not good practice.

Now we are lending at 3-4 times salary which is recognized internationally as a good level to lend at. House prices are rising but Dublin is driving this and nationally this is not the same.

assetcolum

Larry Wildman wrote: »

You're looking for a pat on the back for saving €100k but your accomodation and food costs were paid for by someone else.

So your circumstances are irrelevant because they're different to those of the majority of people.

If I still lived with my parents, I could probably save thousands a month.

Not looking for a pat on the back by anyone

I was just stating my situation

" Could probably save thousands per month "

Irrelevant or not , i save thousands per month and you " probably could " big difference

You sound bitter and should just give up on this thread you have brought nothing productive to it and argue with other posters with nothing intelligent to show

assetcolum

P. Breathnach wrote: »

The purpose of the proposed regulations is to restrict demand. They won't have that effect unless at least some people are put in a position where the amount they can bid is reduced. Yes, it's true that FTBs will suffer the impact more than cash buyers. But seriously, what else can be done? You can't exclude cash buyers from the market.

That post illustrates an important point: people pay at least as much attention to expected monthly repayments as they do to the headline price. When mortgage interest rates fall, prices rise to reflect that. When interest rates rise, housing prices fall.

Currently, loans are abnormally cheap. People who borrow heavily at current rates could be wiped out by an interest rate increase - unable to service their loan, and unable to sell the property for anything like the price they paid for it. I think significant interest rate rises are unlikely in the short-to-medium term, but a real danger in the medium-to-long term.

That's why i am aiming to borrow 60k MAX over 35 years

_Kaiser_

assetcolum wrote: »

Not looking for a pat on the back by anyone

I was just stating my situation

" Could probably save thousands per month "

Irrelevant or not , i save thousands per month and you " probably could " big difference

You sound bitter and should just give up on this thread you have brought nothing productive to it and argue with other posters with nothing intelligent to show

His point is that your circumstances are not representative of the circumstances of the people you're talking about.

Most people aren't working abroad. Most cannot live rent free while they save. Equally most have to buy their own food.

Good for you that you didn't and thus could put that money into savings but to say that everyone else can do the same is nonsense because the basic starting points are completely different.

Saipanne

Larry Wildman wrote: »

What suffering would be avoided?

Do you really think that people being able to borrow 90% of the purchase price of their home caused Ireland's economic collapse.

Ehhhhhhhh, yes.

Balmed Out

chris85 wrote: »

Was different situation then. People were borrowing 10 times salary with LTV ratios of 95%+ and in a lot of case above 100% unfortunately. Lending was wreckless with bonuses/overtimes being taken into account for salary which is not good practice.

I dont think 100% mortgages were available until 2004 and were fairly rare till 2006. I dont know anyone who got a mortgage of 10 times salary, I presume only someone who had somebody else agreeing to be guarantor would have gotten it.

Saipanne

Balmed Out wrote: »

I dont think 100% mortgages were available until 2004 and were fairly rare till 2006. I dont know anyone who got a mortgage of 10 times salary, I presume only someone who had somebody else agreeing to be guarantor would have gotten it.

Is there any data on this out there? Anecdotal evidence is fairly useless.

Frank Lee Midere

chris85 wrote: »

Was different situation then. People were borrowing 10 times salary with LTV ratios of 95%+ and in a lot of case above 100% unfortunately. Lending was wreckless with bonuses/overtimes being taken into account for salary which is not good practice.

Now we are lending at 3-4 times salary which is recognized internationally as a good level to lend at. House prices are rising but Dublin is driving this and nationally this is not the same.

The 3-4x salary is rubbish. In Dublin prices are 300k. That's 10 times median wage.

Frank Lee Midere

Saipanne wrote: »

Is there any data on this out there? Anecdotal evidence is fairly useless.

I remember visiting Ireland around 2006 when 40 year inter generational mortgages were being mooted.

Frank Lee Midere

Larry Wildman wrote: »

What suffering would be avoided?

Do you really think that people being able to borrow 90% of the purchase price of their home caused Ireland's economic collapse.

25% are in arrears. So yes.

Vinnie L

Frank Lee Midere wrote: »

The 3-4x salary is rubbish. In Dublin prices are 300k. That's 10 times median wage.

Do you mean 5 times ?

"Loans granted during the boom for more than 85 per cent of the property value were most likely to default in the wake of the crash, central bank economists said today."

“It appears some banks are willing to lend 4.5 times combined income to higher-rated borrowers, but this is at the upper end of what is typically deemed responsible internationally,” Davy said in a report yesterday.

“Typically a limit of 3-4 times (combined) is considered a more acceptable level. The onus is on the central bank to put limits on the amount of money that can be borrowed to help keep house prices in check.”

It's high time this country done something to prevent the mistakes of the past for a change instead of repeating them.

Villa05

chris85 wrote: »

Now we are lending at 3-4 times salary which is recognized internationally as a good level to lend at. House prices are rising but Dublin is driving this and nationally this is not the same.

Good to see our central bank is following international best practice as it should be after what we have been through

Frank Lee Midere

Belle Poor Surfing wrote: »

Just reading an article in the Independent - no surprise that developers are at all impressed by the news. link

Oh woe is he. Prices will fall.

Tax the bejesus out of his land holdings and he will suddenly find he can build cheaply.