Mortgage deposit rules

Mr.McLovin

Michael Noonan: 'New Central Bank mortgage deposit rules too strict'

http://www.independent.ie/business/personal-finance/michael-noonan-new-central-bank-mortgage-deposit-rules-too-strict-30782154.html

Potatoeman

They could stagger the plan. 15% this year 20% next. The rule seems to be very rushed in with three months notice. I think the income multiples is a better indication.

spaceHopper

I own my home, well the bank does - aka right not I'm not looking.

I don't see what the fuss about 20% is, in 2012 to get a mortgage the banks wanted to see a 20% deposit, that was when prices were falling and they needed enough buffer to guard against negative equity. Now that prices are rising they don't care any more and want to give 90% mortgages. As it helps drive up prices.

The surge in Dublin prices is a bad thing it means that in a few years time I and a lot of others will be prices out of the market so we'll be staying in our 3 bed and not moving.

Then the first time buyers will be priced out, if prices are going up 40K+ in six moths what matter is it that you can't save the extra 10%. Prices will have jumped so your existing 10% is now only 7 and your out.

Something has to be done and unless Noonan has a better idea he should leave Honohan to it.

air

Restrictions on mortgage lending are only ever a bad thing if they restrict people from borrowing enough to build a home built to current building standards.
When banks lend more than this (for houses that are no bigger or built to no higher a standard), the only winners are land owners and banks.
As a society we need to wake up to the fact that high house prices are bad for almost everyone.
We will be far better off with restricted lending in place, we will spend less of our lives working hard to compete against one another for basic accommodation.

Mortgage lending now is as bad as in the boom times, multiples of NET income are very similar (due to increased taxation). The only change is that lenders are now carrying out due dilligence checks on borrowers before advancing funds.

kandoola

Even though id like to see it happen, i dont think it will.
Already they are talking it down.
Its a dead duck now if you ask me

Victor

What is the second option in the poll mean to say?

Moderator

Deliverance XXV

Potatoeman wrote: »

They could stagger the plan. 15% this year 20% next. The rule seems to be very rushed in with three months notice. I think the income multiples is a better indication.

I have to agree. A deposit would indicate that people can save and income multiples indicate that people can afford to pay back a mortgage.

As deposits can be attained from various sources (wealthy family, asset sales, inheritance filtered into savings), multiples of income (and proven history of ability to save after expenditure) is a much more accurate indicator of the average person's ability to repay a large loan over a long period.

Victor

And larger deposits are more useful for both transferring the risk from bank to borrower and controlling overspending.

ted1

spaceHopper wrote: »

I own my home, well the bank does - aka right not I'm not looking.

I don't see what the fuss about 20% is, in 2012 to get a mortgage the banks wanted to see a 20% deposit, that was when prices were falling and they needed enough buffer to guard against negative equity. Now that prices are rising they don't care any more and want to give 90% mortgages. As it helps drive up prices.

The surge in Dublin prices is a bad thing it means that in a few years time I and a lot of others will be prices out of the market so we'll be staying in our 3 bed and not moving.

Then the first time buyers will be priced out, if prices are going up 40K+ in six moths what matter is it that you can't save the extra 10%. Prices will have jumped so your existing 10% is now only 7 and your out.

Something has to be done and unless Noonan has a better idea he should leave Honohan to it.

Person A lives with parents doesn't pay rent. Pisses his wages up againest a wall while saving a bit each week. Person A has no sense of responsibilty and is 30. But has a deposit

Couple B have 1.5 times his income are the same age and have been renting for ten + years so have a small deposit,as they have never missed a rental payment which is greater than what a montage would be.

If you whete s bank who is the safer bet?

Piriz

ted1 wrote: »

Person A lives with parents doesn't pay rent. Pisses his wages up againest a wall while saving a bit each week. Person A has no sense of responsibilty and is 30. But has a deposit

Couple B have 1.5 times his income are the same age and have been renting for ten + years so have a small deposit,as they have never missed a rental payment which is greater than what a montage would be.

If you whete s bank who is the safer bet?

If the circumstances are that the couple have not got a sufficient deposit to have equity in the house they want to borrow for and Person A does then they are not a safer bet.

ted1

Piriz wrote: »

If the circumstances are that the couple have not got a sufficient deposit to have equity in the house they want to borrow for and Person A does then they are not a safer bet.

They have a proven track record of making monthly repayments, they are a safer bet.

Piriz

you don't get it, if something happens the couple A, a job loss etc. and they can not meet the repayments the bank is massively exposed coz they have not enough equity in the house... this is what happened post crash...

if Person A loses his/her job or acts irresponsibility with the repayments the bank can sell the property and keep the deposit...

Couple A's history of paying rent is great and an advisor / underwriter will look favourably on this but it does not equate to equity in the house..

having equity in the house is the safe bet! Deposit = Equity

hmmm

You only have to look at the Independent's headline today that "experts" say it is now "cheaper" to buy rather than rent to realise that as a country we will rush headlong back into another property bubble if given half a chance. The CBI need to protect us from ourselves, because we are nation of idiots when it comes to property.

ted1

Piriz wrote: »

you don't get it, if something happens the couple A, a job loss etc. and they can not meet the repayments the bank is massively exposed coz they have not enough equity in the house... this is what happened post crash...

if Person A acts irresponsibility with his repayments the bank can sell the property and keep his deposit...

Couple A's history of paying rent is great and an advisor / underwriter will look favourably on this but it does not equate to equity in the house..

having equity in the house is the safe bet! Deposit = Equity

If a person in couple a loses job, there's a second income from the second couplee

Piriz

ted1 wrote: »

If a person in couple a loses job, there's a second income from the second couplee

but if they are seeking a joint mortgage it will probably take a joint income to cover their expenses...

Saipanne

hmmm wrote: »

You only have to look at the Independent's headline today that "experts" say it is now "cheaper" to buy rather than rent to realise that as a country we will rush headlong back into another property bubble if given half a chance. The CBI need to protect us from ourselves, because we are nation of idiots when it comes to property.

Yup. That is the point of these measures.

Mr.McLovin

Victor wrote: »

What is the second option in the poll mean to say?

Moderator

it wouldn't let me edit it after my mistake

desertcircus

ted1 wrote: »

Person A lives with parents doesn't pay rent. Pisses his wages up againest a wall while saving a bit each week. Person A has no sense of responsibilty and is 30. But has a deposit

Couple B have 1.5 times his income are the same age and have been renting for ten + years so have a small deposit,as they have never missed a rental payment which is greater than what a montage would be.

If you whete s bank who is the safer bet?

If you're concerned about a downturn and negative equity, the first guy is a better bet. If you're concerned about ability to repay, the second couple are a better bet. The banks already screen to ensure mortgage applicants are more Couple B than Person A; the Central Bank is making sure that on top of that, mortgages given out aren't big enough to cause systemic issues for banks in the event of a popped bubble. 90% mortgages go underwater in the event of a 10%+ drop in house prices; 80% mortgages can take a hit over twice the size before they reach negative equity.

The_Morrigan

Mr.McLovin wrote: »

it wouldn't let me edit it after my mistake

Tell one of the mods....we can edit the poll.

ted1

ted1 wrote: »

They have a proven track record of making monthly repayments, they are a safer bet.

Person A has also saved a considerable deposit which demonstrates that they can make regular payments. There is no reason to believe person A will not pay his/her mortgage. Living at home does not = inability to make repayments on a mortgage.

ted1

Serenity Plain Sugarcane wrote: »

Person A has also saved a considerable deposit which demonstrates that they can make regular payments. There is no reason to believe person A will not pay his/her mortgage. Living at home does not = inability to make repayments on a mortgage.

It doesn't demonstrate any ability to make monthly repayments, the deposit could be made up of several years of irregular savings.

ted1

ted1 wrote: »

It doesn't demonstrate any ability to make monthly repayments, the deposit could be made up of several years of irregular savings.

Why is the assumption that the person wont be able to make repayments? Is it really getting to the stage where people are expected to waste money on rent when they can live at home for free and enjoy their money (while also saving).

The vast majority of people are well able to make essential monthly repayments, when they don't have them they obviously spend more on other stuff but can make them when they have to.

Saipanne

Serenity Plain Sugarcane wrote: »

Why is the assumption that the person wont be able to make repayments? Is it really getting to the stage where people are expected to waste money on rent when they can live at home for free and enjoy their money (while also saving).

The vast majority of people are well able to make essential monthly repayments, when they don't have them they obviously spend more on other stuff but can make them when they have to.

Am I wasting money on rent?

Saipanne

Saipanne wrote: »

Am I wasting money on rent?

If living at home rent free is a viable option for you then yes you may well be wasting money on rent.

The point I made if people who are happy to live at home are forced to rent purely in order to make themselves "look good" for the bank then that is a complete waste of money.

Saipanne

Serenity Plain Sugarcane wrote: »

If living at home rent free is a viable option for you then yes you may well be wasting money on rent.

The point I made if people who are happy to live at home are forced to rent purely in order to make themselves "look good" for the bank then that is a complete waste of money.

Not an option for me, although even if it was, I couldn't bear living with my parents.

I agree with the latter point. I'm not even sure whether banks consider it a factor.

Saipanne

Saipanne wrote: »

Not an option for me, although even if it was, I couldn't bear living with my parents.

I agree with the latter point. I'm not even sure whether banks consider it a factor.

I would hope its not an issue but a few posters here are talking like it would be an issue.

On the living at home, its not an option for me either as Im working too far from home but that was the only reason I moved out I'd happily have lived at home until I was in a position to buy if I could have and would move back into home if I got work close enough.

allibastor

i am unsure of it TBH.

I don't see how having to save up 20% will happen for most people, on a house for 300K that is 60K in the bank.

If you had a couple on 80K a year combined who have kids you would not get much change from the wages to save, so will be forced to rent for longer and then hoping that rent prices don't go up.

Saipanne

allibastor wrote: »

i am unsure of it TBH.

I don't see how having to save up 20% will happen for most people, on a house for 300K that is 60K in the bank.

If you had a couple on 80K a year combined who have kids you would not get much change from the wages to save, so will be forced to rent for longer and then hoping that rent prices don't go up.

How long would it take to raise 60k, do you think?