What were the lending rules pre 2008 financial crash for a mortgage

wally1990

It is currently a standard 3.5 your wage and 10% deposit

What were the standard lending rules back then ?

awec

Pick a number. Then add a bit on.

bluefinger

It was something like 4 times your salary through the 90s and then in the naughties most lost track of it. In 2008 a friend got 6 or 7 times combined salary and salary was seriously inflated. Think his partner was a student so only working part time.

I remember being told I could have whatever I wanted!!!

They would add anything in, income from rent a room, even if you had no intention of renting a room! Any income even if not guaranteed, such as overtime and the like.
Not all lenders were the same, I didn't take a mortgage with the crowd that would give me 'whatever' , I went to a bank who told me what i.could afford, which at the time was around 8.5 times my salary.
They also threw out more, cos it was 100% mortgages but they used to add on a few Bob for furnishing etc!

bluefinger

awec wrote: »

Pick a number. Then add a bit on.

And add another 50k for the extension.

blueskys

I was just finishing in college having just paid off a student loan in 2005. The bank official told me to look at the new apartments in dun laoghaire (450k) and come back to him. I hadn't even started work!

L1011

There were no observed Central Bank rules. Notional bonuses and rent-a-room maximums were added to offer calculation if the bank at least claimed to be doing 4x or whatever. Zero stress testing for rate increases was done

Mortgages over 100% were briefly available to cover stamp duty or furnish the house. Stamp duty was a lot higher if you were liable.

FromADistance

My recollection of the time was that 5 was often mentioned as the standard multiple but in truth it was well over that (Often 7 times and Sub Prime 7+). Then you had the standard LTV of 92%, with 100% and 120% for a time. If you needed extra money to make the numbers work, renting a room (or rooms....) was often taken as income used to justify the mortgage. Terms of up to 40 years were considered.

For investors, some banks did 'self certified' mortgages, and all sorts of interest only arrangements.

An utterly mad and immoral era which obviously ended in tears.

Caranica

"how much do you need"? followed by "sure you probably need another 50k to furnish and finish it". It was madness, the days of 110/120% mortgages.

Darc19

awec wrote: »

Pick a number. Then add a bit on.

Some will think this is a flippant answer, but the be reality is it is fairly correct.

You'd go into your bank, you'd have joint salary of circa €85,000 and they'd offer you 500,000 without question.

If you wanted €650,000, you'd just have to threaten to go to another bank and the 650,000 was agreed. You just had to state that you'd rent out a couple of rooms.

It was a joke.


And it was not just Ireland. The USA was worse. Look at the film The Big Short and you'll get the idea.

The 2000s really was life on easy mode. It felt like the end of history, where economic problems weren't a thing anymore. So goddamn oblivious, hedonistic and sure of ourselves. People back then were even all bloated, puffy and acne-afflicted from unhealthy diets and boozing, whereas now they are all mega-conscientious health freaks, analogous to how the economic consensus changed to one of keeping a tight rein on things following the earlier hedonistic free-for-all.

L1011

I'd have to dig to find the docs now, but IIB (now KBC) approved me to buy a 195k house in the midlands on a 29k basic salary, 100% mortgage - agent having put in rent a room of then then max of 10k a year as 'income' along with overtime and bonuses to make the multiplier look sane, and not nearly 7x salary.

I didn't buy it. Thankfully. Believe they were selling for 60-70k at one stage! The bonuses and much of the overtime evaporated in the crash and I'm fairly sure I would have been very hard pressed to get 10k a year for the spare room even in the boom.

Darc19

The other type of mortgage was the "give the guy €500 and sign the form"

The rest was filled in for you.

Irish nationwide did these.

Usually it was your solicitor that put you in touch with the right person. (Underwriter) Very much targeted the self employed.

Probably was more the nineties that this was done regularly.

appledrop

bubblypop wrote: »

I remember being told I could have whatever I wanted!!!

They would add anything in, income from rent a room, even if you had no intention of renting a room! Any income even if not guaranteed, such as overtime and the like.
Not all lenders were the same, I didn't take a mortgage with the crowd that would give me 'whatever' , I went to a bank who told me what i.could afford, which at the time was around 8.5 times my salary.
They also threw out more, cos it was 100% mortgages but they used to add on a few Bob for furnishing etc!

This 100%. Anyone I know who bought on their own during this time were all told to include rent a room income even if no intention of ever renting a room.

It was mad stuff altogether, no wonder prices sky rocketed.

ongarboy

I don't know if it was all that generous for everyone. I applied for a mortgage in 2005 during the heart of the craziness and got the 5 times the salary and no more from one bank and declined by all the others for the modest and relatively cheap property I identified for the loan application. Even though at the time I was 5 years into a permanent multi national finance firm role with defined benefit pension(as secure a job as they come), had been promoted twice in the previous two years to managerial grade, had extremely generous 25% of salary bonuses which were not factored in, no other loans, a perfect credit rating and excellent saving record, it somehow did not work in my favour . It really hindered my ability to purchase as prices back then as we all know were crazy.

Even though my salary and promotions repeatedly advanced significantly over the subsequent years I was somehow considered more of a risk to mortgage lenders to the many high risk cases that defaulted in their thousands so I scratch my head that all these people in precarious jobs who got mortgage multiples infinite times their salaries. The irony is I'm the most risk averse person I know and the thought of living beyond my means makes my blood run cold.

The upside is that I'm still on my 0.75% tracker and still happily living in the home I got from the solitary bank that approved me all those years ago.

James 007

L1011 wrote: »

I'd have to dig to find the docs now, but IIB (now KBC) approved me to buy a 195k house in the midlands on a 29k basic salary, 100% mortgage - agent having put in rent a room of then then max of 10k a year as 'income' along with overtime and bonuses to make the multiplier look sane, and not nearly 7x salary.

I didn't buy it. Thankfully. Believe they were selling for 60-70k at one stage! The bonuses and much of the overtime evaporated in the crash and I'm fairly sure I would have been very hard pressed to get 10k a year for the spare room even in the boom.

Ohh that faithful IIB, how can I forget them, giving me close to 7 times my salary including that fictitious bonus letter which helped me get 2/3 of my approved mortgage amount along with my uncle to fund up the remaining 1/3. Ask me where did I get the bonus figure, & to quote one banker, I plucked it out of my arse. God those were the days on how to get on the property ladder & I paid a hugh mortgage for the house. If I sold it now I would probably get my money back.:D

JimmyVik

Basically you just self certified whatever earnings you like.
Go to the bank looking for x amount.
Bank would suggest you take x + 25% and go buy yourself a bigger house.

is_that_so

Were there rules? You could provide anything as evidence of a deposit. I knew numerous people who got CU "improvement" loans, tapped relatives, friends and even one person who claimed they maxxed out their CC to produce cash. Banks too found you qualified for more than you thought.

JimmyVik

is_that_so wrote: »

Were there rules? You could provide anything as evidence of a deposit. I knew numerous people who got CU "improvement" loans, tapped relatives, friends and even one person who claimed they maxxed out their CC to produce cash. Banks too found you qualified for more than you thought.

I know lots of people who paid their deposit on their credit cards.
Some banks even gave you a second credit card if you needed it to pay your deposit.

Smee_Again

JimmyVik wrote: »

I know lots of people who paid their deposit on their credit cards.
Some banks even gave you a second credit card if you needed it to pay your deposit.

Deposit on the credit card and a CU loan for furniture.

Darc19

Back then prices were rising at 10%+ per year, so we all felt rich and gambled.

Banks were making huge profits, the brokers and managers were getting bonuses, the government was getting tons of stamp duty.

Everyone was a winner. Or so it seemed until suddenly some people wanted the money they lent the bank back and the house of cards came falling in.

There are people still who will blame the banks for it all, but everyone played their part in creating the bubble.

Here's the book the film The Big Short is based on
https://en.wikipedia.org/wiki/The_Big_Short

wally1990

JimmyVik wrote: »

I know lots of people who paid their deposit on their credit cards.
Some banks even gave you a second credit card if you needed it to pay your deposit.

Jesus H Christ

cruizer101

Just for reference my parents bought a house in 94 and my recollection was 2.5 or maybe 3 times the primary earners salary plus 1 times the secondary. I suppose the logic being people would buy a house and then have kids so good chance the secondary earnings might disappear or at least be sucked up by childcare.
Again that wasn't a hard rule but I do think at the time it was a standard most banks stuck to close enough.

drogon.

A mate of mine got 6 times his salary, his missus only worked part time so large chunk was based on his salary.
He even got a free holiday thrown in by the broker (Gunne) - Would have been around 2004/2005

Kalimah

cruizer101 wrote: »

Just for reference my parents bought a house in 94 and my recollection was 2.5 or maybe 3 times the primary earners salary plus 1 times the secondary. I suppose the logic being people would buy a house and then have kids so good chance the secondary earnings might disappear or at least be sucked up by childcare.
Again that wasn't a hard rule but I do think at the time it was a standard most banks stuck to close enough.

We bought in 1988 for IR£38k on a combined salary of 20k. I was working for B of I at the time and was fortunate enough to get a staff loan at 3%.
I left the bank in 93 and we moved house. Unfortunately fixed our mortgage for 10 years at a rate of 10%. Worst thing ever. When the fixed rate was over we moved to EBS - that was 2003.
By no means did we get money thrown at us, even though I was working and hubby was in a civil service job. We got a mortgage of 45k which was less than a multiple of once of our combined salary.
I think B of I and EBS were probably the most cautious of lenders back then.

glen123

Kalimah wrote: »

We bought in 1988 for IR£38k on a combined salary of 20k. I was working for B of I at the time and was fortunate enough to get a staff loan at 3%.
I left the bank in 93 and we moved house. Unfortunately fixed our mortgage for 10 years at a rate of 10%. Worst thing ever. When the fixed rate was over we moved to EBS - that was 2003.
By no means did we get money thrown at us, even though I was working and hubby was in a civil service job. We got a mortgage of 45k which was less than a multiple of once of our combined salary.
I think B of I and EBS were probably the most cautious of lenders back then.

I think the main madness began post 2003.

We went to all banks in 2002 and 2003 incl First Active that no longer exists and all places except First Active were offering us Combined Income x 3 max. First Active offered x4, so we went with them and paid 10% deposit. This was the middle of 2004.

Then in 2006 we decided to renovate the house and moved the mortgage to EBS. They sent a man out to value the house as we would have been able to top up mortgage up to the 80% of the value of the house, and the man asked how much of a top up we needed and simply valued the house to make sure we get the top up we wanted. Difference between what we paid in 2004 and evaluation in 2006 was 100k.With the top up and wage increases we got between 2004 and 2006, the borrowed amount was still Combined Income x 4 but things were way more flexible all right and smth tells me if I had mentioned a higher top up amount, another 50k would have been added to the value of the house just like that.

Nijmegen

I remember a client telling me about her son, who had his own house - renting rooms, paying the mortgage - another house and an apartment at this time. He was a public servant in a technical role, doing nixers on the side. "When you think about it, he's a millionaire on paper at the age of twentysomething." I smiled, nodded, and didn't think to mention that it's assets minus debts that tells you what you are. I don't know what happened to him in the end, but I'd be willing to bet he spent the bust at least grumbling about tax on rent and the like, if he did make it through.

What rules? Any fool could get a mortgage back then.

Dr Turk Turkelton

I was changing a mortgage over at one stage around early 2006 and I contacted one of the lenders that used advertise in the papers back then about their rates.
I met with their female representative in TGI Fridays in Blanch on a Thursday on the way home from work where we had some food and cocktails and had a great time. There was very little discussion of the usual mortgage questions only a cursory mention of how much I was earning and took about 10 minutes filling out a form.
Got offered the mortgage with them no problem.
Those were the days my friend...

tinofapples

I recall a work colleague telling me to get enough on our self build mortgage to buy a new car ... "it's the cheapest money you'll get" ðŸ˜႒

sameoldname

My favorite was people paying for things like furniture and cars on their mortgage. I mean, if people couldn't see that it was a bad idea to be paying for 30+ years for something that would only last 10 max they deserved everything they got.

Edit: I see tinofapples got there before me!

DubCount

cruizer101 wrote: »

Just for reference my parents bought a house in 94 and my recollection was 2.5 or maybe 3 times the primary earners salary plus 1 times the secondary. I suppose the logic being people would buy a house and then have kids so good chance the secondary earnings might disappear or at least be sucked up by childcare.
Again that wasn't a hard rule but I do think at the time it was a standard most banks stuck to close enough.

I was going to say this. I got a mortgage in 95. The rule was 2.5x primary salary plus 1x secondary salary. My calculation was about £300 short of the amount I wanted to borrow, and the bank branch had to apply to head office for an exemption.

Buddy Bubs

I got mortgage for 6 times salary post crash in 2010. Zero underwriting.

Cuddlesworth

Buddy Bubs wrote: »

I got mortgage for 6 times salary post crash in 2010. Zero underwriting.

Thats odd, most people I know found it difficult to get anything post 2008. I never looked into mortgages, but as somebody earning f all, I was being offered 15k credit cards at the time.

eviltwin

I bought my house in 2003 and I don’t recall it being that easy. We got turned down by every bank bar the one we got the mortgage with. I did hear stories of people borrowing crazy sums of money but that was never an option for me.

Sleeper12

For what it's worth banks were strict in the early 90s. If both were working the formula was twice or two & half times the bigger wage & once the smaller one. You had to have 10 percent deposit as maximum they would loan was 90 percent of what they valued the property.

irishguy

In 2017 within 16 minutes in a branch on my own (gf wasn't even with me) they offered me 8 times our joint income @100% LTV, we were both out of college 12m.
Even with a small increase in interest rates we would have had no chance of paying it, forget about the tax increases that came after or having kids etc.

NIMAN

I always remember an audience member on one of rtes studio audience shows, around 2011 when all the post mortems were still being carried out, saying she got a mortgage 11 times her salary. Or was it 13!

She was single.

javaboy

irishguy wrote: »

In 2017 within 16 minutes in a branch on my own (gf wasn't even with me) they offered me 8 times our joint income @100% LTV, we were both out of college 12m.
Even with a small increase in interest rates we would have had no chance of paying it, forget about the tax increases that came after or having kids etc.

2017 or 2007? In Ireland?

Nijmegen

People at the moment looking for a mortgage regularly decry the current rules around 90% LTV and the 3.5x earnings in particular. What they don’t seem to cop is that it’s a con on them if the rules were looser - the same number of houses are there to be bought. Either the price will go up more than they can afford or they’ll end up in the same house with a bigger mortgage.

Of course, had anyone figured that out in about 2000 we’d likely be a lot better off today as a country…

Buddy Bubs

Cuddlesworth wrote: »

Thats odd, most people I know found it difficult to get anything post 2008. I never looked into mortgages, but as somebody earning f all, I was being offered 15k credit cards at the time.

1 payslip. No p60.
6 times my income of 35k as a mortgage.
I put in 10% deposit
Took about 2 days to get approved
My broker had a contact in the bank.
Shenanigans.
But anyway, my income is much higher now and I'm still in same house. Never struggled to pay really.

Darc19

Sleeper12 wrote: »

For what it's worth banks were strict in the early 90s. If both were working the formula was twice or two & half times the bigger wage & once the smaller one. You had to have 10 percent deposit as maximum they would loan was 90 percent of what they valued the property.

Outwardly they were strict, but if you knew the manager or were introduced to him, they became very flexible and led you to the correct answers.

In many cases the manager had the final decision on the loan.

The deposit though was strict. But loans were to 92% and you had the first time buyers grant (£3,000 I think) which builders would deduct from the deposit once you signed a form.

In 1990 you'd buy a new 3 bed semi in ballinteer for £63,000

Flinty997

Darc19 wrote: »

Outwardly they were strict, but if you knew the manager or were introduced to him, they became very flexible and led you to the correct answers.

In many cases the manager had the final decision on the loan.
...

Was strict when everyone I know started buying late 90s early 2000s. I know people with 33% deposits that were refused.

2.5 x1 salary + 1x1 a second salary. Was just after the high inflation. The rules were set by the banks. It's really only when banks lifted their rules did you start seeing crazy loans. The govt should have stepped then. instead they talked it up adding fuel to the fire. Took over a decade for regulator to get their finger out.

Chris_5339762

Mine was about 3.5 times salary, back in 2010 or 2011, I can't remember which.

The permanent public sector contract was what allowed it then, the broker told me.

Tork

Chris_5339762 wrote: »

Mine was about 3.5 times salary, back in 2010 or 2011, I can't remember which.

The permanent public sector contract was what allowed it then, the broker told me.

That was the era when getting a mortgage went from "you have a pulse, here have a mortgage" to being a lot harder to get one. If you could afford it, it was a good time to buy.

I have a friend who bought a house in the mid 2000s despite having 4-5k of a credit card debt. I was shocked when she told me. I can't remember now if it was a 100% mortgage but it could easily have been if she was telling the truth about the credit card. She had a good job though.

JimmyVik

Mortgages took off when it became more common than not for 2 incomes to buy a house. Prices shot up then. Double the mortgage amount was available and they were competing with other double income buyers for the most part.
Previously double income buyers would not be competing with many other double income buyers, so prices were relatively low as there werent that many.

gibgodsman

Shows how absolutely mad it is, I have 26k ready for a deposit, a combined income with the other half of 50k and still cannot get a home in Navan, yet anyone over the age of 40 has a home they bought in the 00's with awful jobs and incomes.

Being told "Get a gift from a family member" by a financial advisor to be able to get a mortgage is the norm now and its disgusting

Flinty997

I think there's more to these stories than people let on. They've probably pulled all sorts of tricks, to get past any requirements. But they won't have told you that bit.

Flinty997

JimmyVik wrote: »

Mortgages took off when it became more common than not for 2 incomes to buy a house. Prices shot up then. Double the mortgage amount was available and they were competing with other double income buyers for the most part.
Previously double income buyers would not be competing with many other double income buyers, so prices were relatively low as there werent that many.

Double incomes was norm in early 2000s. Last I heard of people able to it on a single income was 80s~90's. That's 30~40yrs ago. Its along time ago.

Flinty997

Flinty997 wrote: »

Double incomes was norm in early 2000s. Last I heard of people able to it on a single income was 80s~90's. That's 30~40yrs ago. Its along time ago.

In the 2000s, me and six of my female single friends all bought 3 bed houses, money was thrown at everyone!

L1011

Flinty997 wrote: »

I think there's more to these stories than people let on. They've probably pulled all sorts of tricks, to get past any requirements. But they won't have told you that bit.

The brokers / mortgage agents in banks were usually the ones pulling tricks and presenting it as a fait accompli to borrowers.

Flinty997 wrote: »

Double incomes was norm in early 2000s. Last I heard of people able to it on a single income was 80s~90's. That's 30~40yrs ago. Its along time ago.

I bought on a single income in 2012. I was offered sufficient in the boom time.

Two of my siblings also bought on single incomes, in 99 and the mid 00s (very close to the top)