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New Mortgage Rules

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  • 12-02-2015 1:49pm
    #1
    rabwaygal
    Registered Users Posts: 159 ✭✭


    Folks,

    Just a quick question about the new mortgage rules which came into practice today.

    The max mortgage you can have is x3.5 your salary. Does this exclude the deposit saved?

    Also, the x3.5 seems to be when a sole applicant. Is there anything for joint applications (like x3.5 the 1st applicant and x1 the second applicant)?

    I had a snoop online but couldn't make sense of it.

    Thanks


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    #2
    Michael D Not Higgins
    Moderators, Society & Culture Moderators Posts: 7,223 Mod ✭✭✭✭Michael D Not Higgins


    Yes it excludes the deposit. 3.5 of all income, i.e. 3.5 of sum of both parties for joint applicants.


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    #3
    NoQuarter
    Registered Users Posts: 4,632 ✭✭✭NoQuarter


    Anyone have a link to the news that it commenced today? Preferably from the Central Bank themselves? I checked their site and couldnt find it.


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    #4
    Eldarion
    Registered Users Posts: 484 ✭✭Eldarion


    Yesterday I believe.

    Linkie:

    http://www.rte.ie/news/business/2015/0211/679414-mortgage-central-bank/


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    #5
    Michael D Not Higgins
    Moderators, Society & Culture Moderators Posts: 7,223 Mod ✭✭✭✭Michael D Not Higgins


    NoQuarter wrote: »
    Anyone have a link to the news that it commenced today? Preferably from the Central Bank themselves? I checked their site and couldnt find it.

    The Statutory Instrument was signed on Monday, published Tuesday, in force Wednesday.
    http://www.irishstatutebook.ie/pdf/2015/en.si.2015.0047.pdf


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    #6
    NoQuarter
    Registered Users Posts: 4,632 ✭✭✭NoQuarter


    Michael D Not Higgins wrote: »
    The Statutory Instrument was signed on Monday, published Tuesday, in force Wednesday.
    http://www.irishstatutebook.ie/pdf/2015/en.si.2015.0047.pdf

    Perfect, thanks.


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    #7
    seamus
    Registered Users Posts: 68,317 ✭✭✭✭seamus


    Yes, it's 3.5 times your joint gross annual income. That's the maximum amount you can borrow - so that makes up 80% of the mortgage.

    A simple example - two people on 50k each, the maximum they can borrow is €350k. Plus deposit of 87,500 means they can buy a property up to €437,500.

    These aren't hard rules - banks will stretch themselves a little if you have a very solid credit history and income.


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    #8
    NoQuarter
    Registered Users Posts: 4,632 ✭✭✭NoQuarter


    What is your interpretation of this section:

    "Loan-to-Income
    5. A lender shall ensure that the total aggregate monetary amounts advanced
    to borrowers under high loan-to-income housing loans made for principal home
    purposes in a relevant period shall not exceed 20 per cent of the total aggregate
    monetary amounts advanced to borrowers under housing loans made for principal
    home purposes by the lender in that relevant period."

    I'll hold off on my interpretation as I don't want to sway you one way or another. Note: it should be read in conjunction with the definition section in the SI.


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    #9
    Michael D Not Higgins
    Moderators, Society & Culture Moderators Posts: 7,223 Mod ✭✭✭✭Michael D Not Higgins


    NoQuarter wrote: »
    What is your interpretation of this section:

    "Loan-to-Income
    5. A lender shall ensure that the total aggregate monetary amounts advanced
    to borrowers under high loan-to-income housing loans made for principal home
    purposes in a relevant period shall not exceed 20 per cent of the total aggregate
    monetary amounts advanced to borrowers under housing loans made for principal
    home purposes by the lender in that relevant period."

    I'll hold off on my interpretation as I don't want to sway you one way or another. Note: it should be read in conjunction with the definition section in the SI.

    High LTI is defined in the SI as over 3.5. This clause allows 20% of the bank's loan book to exceed an LTI of 3.5 for owner occupier mortgages.

    By the way, this has been discussed extensively on the other thread http://www.boards.ie/vbulletin/showthread.php?t=2057300400


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    #10
    Mr. Loverman
    Closed Accounts Posts: 4,001 ✭✭✭Mr. Loverman


    seamus wrote: »
    Yes, it's 3.5 times your joint gross annual income. That's the maximum amount you can borrow - so that makes up 80% of the mortgage.

    A simple example - two people on 50k each, the maximum they can borrow is €350k. Plus deposit of 87,500 means they can buy a property up to €437,500.

    These aren't hard rules - banks will stretch themselves a little if you have a very solid credit history and income.

    Do you mean these are just guidelines for banks?

    Please tell me no...


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    #11
    Captain Chaos
    Registered Users Posts: 11,174 ✭✭✭✭Captain Chaos


    There is a little give but not much and it's on a case by case basis, but yes these rules are the yard stick now to keep prices in check but also will force some people who could buy and pay off the loan being forced to rent at higher monthly payments than a mortgage like me. Bank says I can't afford it yet I'm showing them what I paying each month to like now and have not missing a payment on anything ever and have no loans or debt.

    I'd say landlords and agencies are loving these new rules. There is no capping rent prices now with these mortgage rules. The only way is up and out of Dublin.


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    #12
    seamus
    Registered Users Posts: 68,317 ✭✭✭✭seamus


    Mr. Loverman wrote: »
    Do you mean these are just guidelines for banks?

    Please tell me no...
    No, they're not guidelines, they are rules, but there's scope to bend them a little. As per the discussion above - 20% of their loan book is permitted to be outside of the 3.5x LTI multiplier.

    Likewise 15% of the value of their loan book is allowed to be outside the 80% LTV limit.

    So while there is scope for the bank to be flexible in individual cases, they are overall restricted by actual enforced rules and not just guidelines.


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    #13
    Mr. Loverman
    Closed Accounts Posts: 4,001 ✭✭✭Mr. Loverman


    seamus wrote: »
    No, they're not guidelines, they are rules, but there's scope to bend them a little. As per the discussion above - 20% of their loan book is permitted to be outside of the 3.5x LTI multiplier.

    Likewise 15% of the value of their loan book is allowed to be outside the 80% LTV limit.

    So while there is scope for the bank to be flexible in individual cases, they are overall restricted by actual enforced rules and not just guidelines.

    How long until the bank internally redefines what a "loan book" is for.

    "We believed these sorts of customers weren't really being given a loan in our understanding of the word, but rather were being leveraged as an investment vehicle for profitable purposes..."


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    #14
    seamus
    Registered Users Posts: 68,317 ✭✭✭✭seamus


    Mr. Loverman wrote: »
    How long until the bank internally redefines what a "loan book" is for.

    "We believed these sorts of customers weren't really being given a loan in our understanding of the word, but rather were being leveraged as an investment vehicle for profitable purposes..."
    They can't really, the relevant legislation pretty clearly defines what a loan is for the purposes of these rules.

    The regulations themselves also state that banks are not permitted to do anything which allows them to bypass the rules, including restructuring loans or coming up with special loan agreements.

    That's not to say there won't be some angle discovered (these bankers are wily types), but the banks themselves can't directly worm their way out of these rules.


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