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

iColdFusion

gibgodsman wrote: »

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

I wouldn't be too jealous, most people that got those crazy mortgages during the boom vastly overpaid for houses and are probably only now getting out of negative equity.

Saddens me a bit how quickly everyone has forgotten how crap the post 2008 years were; mass emigration of young people and graduates, spike in suicides due to massive debts, massive mental health issues when people lost hope in the future, more taxes, cutbacks on public services, they really were dark days

On topic, people buying new cars with their 110% mortgages was all the rage back in the day, shur you couldn't be parking some 4 year old car in front of your new house could you :rolleyes:

JimmyVik

iColdFusion wrote: »

I wouldn't be too jealous, most people that got those crazy mortgages during the boom vastly overpaid for houses and are probably only now getting out of negative equity.

Saddens me a bit how quickly everyone has forgotten how crap the post 2008 years were; mass emigration of young people and graduates, spike in suicides due to massive debts, massive mental health issues when people lost hope in the future, more taxes, cutbacks on public services, they really were dark days

On topic, people buying new cars with their 110% mortgages was all the rage back in the day, shur you couldn't be parking some 4 year old car in front of your new house could you :rolleyes:

Along with half the term of their mortgage over with.
I actually wish I had bought, even in 2007.

iColdFusion

JimmyVik wrote: »

Along with half the term of their mortgage over with.
I actually wish I had bought, even in 2007.

Even if you could have bought the same house 4 years later for 100k less?
100k + interest is alot of cash even if you got a tracker mortgage.

There was a decent amount of people who got 400k mortgages, lost their job during the crash, bank took the house and sold it for 250-300k and the people still owed the bank the balance of the mortgage while trying to pay rent also.
Alot of people really thought by handing back the keys to the bank they were off the hook.

JimmyVik

iColdFusion wrote: »

Even if you could have bought the same house 4 years later for 100k less?
100k + interest is alot of cash even if you got a tracker mortgage.

There was a decent amount of people who got 400k mortgages, lost their job during the crash, bank took the house and sold it for 250-300k and the people still owed the bank the balance of the mortgage while trying to pay rent also.
Alot of people really thought by handing back the keys to the bank they were off the hook.

Well i didnt buy it 4 years later either

James 007

You sound like the guy that has every intention of buying but hasn't bought yet, or your the guy that constantly looks at houses but has no intention of buying yet.:rolleyes:

Dempo1

wally1990 wrote: »

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

What were the standard lending rules back then ?

Honestly tge rules were not dissimilar, I get a sense some think getting a mortgage became difficult since 2008, this not generally the case and infact when I got my mortgage (single) in 2001, I had to jump through hoops and the ratio was 3 times salary and 10% deposit. I accept there are certainly higher deposit requirements now and higher loan ratio, mine was maximum of 90%. I should also point out interest rates were higher back then also and I can't recall if tracker option was available then.

So whilst I believe central bank rules appear to make getting a mortgage more difficult, I really don't think it has. I'd finally say, prices back in 2001 may have been slightly less than they are now, but only slightly.

Darc19

JimmyVik wrote: »

How is the Netherlands for repossessing - in case everyone loses their jobs who has a 100% mortgage. In Ireland we dont do repossessions really.

If you stopped paying today, there would be new owners in the property well before Christmas.

It's a simple district court hearing.

Once a bank decides to repossess, it takes 2-4 weeks to complete and property is sold at auction within a very short timeframe.

Flinty997

Dempo1 wrote: »

Honestly tge rules were not dissimilar, I get a sense some think getting a mortgage became difficult since 2008, this not generally the case and infact when I got my mortgage (single) in 2001, I had to jump through hoops and the ratio was 3 times salary and 10% deposit. I accept there are certainly higher deposit requirements now and higher loan ratio, mine was maximum of 90%. I should also point out interest rates were higher back then also and I can't recall if tracker option was available then.

So whilst I believe central bank rules appear to make getting a mortgage more difficult, I really don't think it has. I'd finally say, prices back in 2001 may have been slightly less than they are now, but only slightly.

I'm my experience house prices around 2000 were about 50% peak Celtic Tiger. They are only back to that now. Dunno if wages are different now to peak Celtic Tiger.

Of courses depends on the house, the location and the job. Varies widely.

Dempo1

Flinty997 wrote: »

I'm my experience house prices around 2000 were about 50% peak Celtic Tiger. They are only back to that now. Dunno if wages are different now to peak Celtic Tiger.

Of courses depends on the house, the location and the job. Varies widely.

Yes that sounds right, admitidly I ended up buying a cottage in the Midlands (I'm a Dub) and even back in 2001, Dublin was expensive, I endured 4 hard years of commute to work in Dublin when Kildare villages were not by passed, those in the know will realise what a nightmare that was, I spent as much time in the car as I did on work and I'm not kidding.

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.

I did it in 2019.

Flinty997

Flinty997 wrote: »

I'm my experience house prices around 2000 were about 50% peak Celtic Tiger. They are only back to that now. Dunno if wages are different now to peak Celtic Tiger.

Of courses depends on the house, the location and the job. Varies widely.

The prices now are way beyond 2000 prices!
Very close to , and in many cases, beyond prices of 2007.

Darc19

Flinty997 wrote: »

I'm my experience house prices around 2000 were about 50% peak Celtic Tiger. They are only back to that now. Dunno if wages are different now to peak Celtic Tiger.

Of courses depends on the house, the location and the job. Varies widely.

I bought and sold several times in the 90's and early 00's

In the same house now since 2005 ( another 4 years and it's all mine )

Recently two previous houses came back on the market so I can provide exact priced.

One in Rathfarnham - sold 2003 for €370,000, sold last November €410,000. Bought 2001 for £220,000 but needed some finishing that cost about £10,000. So approx €290,000 euro

The other in Newbridge sold last month for €445,000, sold 2005 for €440,000. Bought 2003 for €295,000

Both were in near identical condition to when I sold them - no extensions or fancy new kitchens or dramatic garden works.

Those buying the secondhand houses also had stamp duty to pay. (17k and 35k respectively - ouch)

So prices are back to 2004 / 2005 levels if you calculate out stamp duty

Buddy Bubs

My house is about 90% of its peak value 2007 now I believe, based on what a few on the road went for this year.
I bought it for about 55 to 60% of peak value in 2010.
It dropped to about 50% by 2012 and is well back now.

Thestart

Dempo1 wrote: »

Yes that sounds right, admitidly I ended up buying a cottage in the Midlands (I'm a Dub) and even back in 2001, Dublin was expensive, I endured 4 hard years of commute to work in Dublin when Kildare villages were not by passed, those in the know will realise what a nightmare that was, I spent as much time in the car as I did on work and I'm not kidding.

I purchased on my own in 2001 in my late 20’s, I couldn’t afford a house in Cabra at the time. I think it was 3 times wages. I bought a 2 bed bungalow in Hartstown for £108k punts. 10% deposit as far as I remember. The rules were strict then but 2 years later I bought again and it all had changed, throwing money at you!

Flinty997

bubblypop wrote: »

The prices now are way beyond 2000 prices!
Very close to , and in many cases, beyond prices of 2007.

I think you misread my post. Or maybe I phrased it badly.

I meant prices in 2000 were 50% of what they were at the peak. So a house that I know in 2000 was 200k. But at peak Celtic Tiger they were touching 400k. Those never fell back below 330k but they are now at Celtic Tiger peak and above 390-450k.

But we have 1.2 million extra people now. I don't know how much more housing was built in that time.

c montgomery

wally1990 wrote: »

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

What were the standard lending rules back then ?

I got 7 times my salary, 100% mortgage.
Worst thing that ever happened to me.

Flinty997

Well seems in this thread everyone has been able to buy on a single income at all times between 1990-2019. So if that's the case what on earth are people complaining about. Houses apparently have always been perfectly affordable. You should all have at least one or more by now.

c montgomery

bubblypop wrote: »

The prices now are way beyond 2000 prices!
Very close to , and in many cases, beyond prices of 2007.

I would say that is the exception.

I know properties my friends and I bought are @ about 70% -80 %of their 2007 value
We are waiting to sell and have had then valued

Flinty997

c montgomery wrote: »

I would say that is the exception.

I know properties my friends and I bought are @ about 70% -80 %of their 2007 value
We are waiting to sell and have had then valued

I would have said that same as you. But I just checked at the weekend and the houses I use as a guide in my area have all jumped around 10% since I last checked about 4 months ago.

That's said it's very much depends on the property and the location.

Flinty997

c montgomery wrote: »

I got 7 times my salary, 100% mortgage.
Worst thing that ever happened to me.

It's a gamble. Could go either way. I'm both glad I was prevented from overreaching. But where I am is too small. If I'd gone bigger at the time, It would still be big enough now. What was only a small difference at the time. Is massive now.

Nijmegen

elefant wrote: »

Genuine question: while understanding the residual trauma of the collapse of the housing bubble naturally leads to greater caution, why is it that banks other countries in Europe can be so much more liberal with their lending? Are the current Irish lending rules the sensible ones and other countries are being reckless?

The central bank of Ireland publishes data on people in arrears for 10+ years where the house hasn't been repossessed. A mortgage should be a really safe bet for a bank as it is a secured loan, on a property. But if you can't exercise the security, somebody has to pay to cover the losses.

That's not the only reason Irish banks have to charge more, but unlike stress tests moving beyond the data of the crash period (imposing stricter limits) the securitization of mortgages is not changing anytime soon in Ireland.

bubblypop wrote: »

The prices now are way beyond 2000 prices!
Very close to , and in many cases, beyond prices of 2007.

Flinty997 wrote: »

I think you misread my post. Or maybe I phrased it badly.

I meant prices in 2000 were 50% of what they were at the peak. So a house that I know in 2000 was 200k. But at peak Celtic Tiger they were touching 400k. Those never fell back below 330k but they are now at Celtic Tiger peak and above 390-450k.

But we have 1.2 million extra people now. I don't know how much more housing was built in that time.

The CSO has data on this.

Overall, the national index is 14.3% lower than its highest level in 2007. Dublin residential property prices are 19.6% lower than their February 2007 peak, while residential property prices in the Rest of Ireland are 16.8% lower than their May 2007 peak.

I think a lot of people look at the recovery from the trough in 2013 rather than the peak - vs the trough, prices have just about doubled. But that's still below 2007.

Property prices nationally have increased by 91.0% from their trough in early 2013. Dublin residential property prices have risen 99.1% from their February 2012 low, whilst residential property prices in the Rest of Ireland are 91.4% higher than at the trough, which was in May 2013.

Interestingly if you look at the CPI index - which itself is a proxy for wage growth and inflation overall - vs May 2007, inflation has been 6.6% (ie, a job that paid €50,000 in May 2007 likely gets paid €53,300 today).

So in real terms, your income on a like-for-like 3.5x salary basis would buy you significantly more home.

The issue, as posed at the top of the thread, is that the lending wasn't capped at 3.5x in the last boom - which itself contributed to the eye watering prices of the time.

If we had the same property in Dublin in 2007 and it cost €175,000, you'd have afforded it on your €50k salary at 3.5x. Today, you could afford €186.5k with inflation; but actually the same property would only cost €141k.

The issue for home buyers is a combination of the (linked) tighter central bank lending rules and the lack of supply.

rob316

Brother bought a house in 2005, he was 21 finishing an apprenticeship. About 30k on paper, they gave him 240k. ****ing mental, and he said the broker reckoned he could get more if he wants.

tdf7187

wally1990 wrote: »

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

What were the standard lending rules back then ?

Lending policies of most if not all of the financial institutions during the '99 to '07 period can be briefly summarised as follows:

(1) How much do you want?

(2) Are you sure that's enough?

James 007

&

(3) Sure we will throw in a new car too:rolleyes:

Darc19

tdf7187 wrote: »

Lending policies of most if not all of the financial institutions during the '99 to '07 period can be briefly summarised as follows:

(1) How much do you want?

(2) Are you sure that's enough?

It was literally only 2005-2007 when rules went out the window.

2004 was easy enough, but still had parameters.

Remember the economy was roaring back then too and the threat of unemployment was zero.

An Ri rua

Darc19 wrote: »

It was literally only 2005-2007 when rules went out the window.

2004 was easy enough, but still had parameters.

Remember the economy was roaring back then too and the threat of unemployment was zero.

'The economy' is that vague metric that gets us in trouble so often.

From 1999 to 2004, a proper economy existed whereby we we were exporting and much of our tax receipts came from genuine growth. From 2004 to 2007, we began to experience the wealth effect, as consumers, and the tax receipts became heavily based on property transactions. Worse, capital that should have been invested in assets (which produce yields and returns) were being pumped into trophy assets which very often weren't even bein asked to seek a return (if they could at all).
It got to the point that the media frequently discussed property buys (abroad) as price plays or yield plays. Or both. God Almighty. Like letting children into the back room of a sweet shop.

This economy is far healthier in that property is more an expression of wealth than the main driver of wealth but, with the ECB and many of the merchant banks on shaky ground since 2008 and built upon the quicksand of the world reserve USD, we're in a world of dark trouble and very few know it.
From July 1st, our world changes, with Basel III and its impact on the derivatives world, but it may take until Christmas for the effects to crystallise fully. When they do, the real economy will be exposed for what it is. Weak, and now decimated by necessary Covid brakes being applied.

Triangle

Remember in 2003 ish times, I kept getting a credit card statement and every now and then the bank would have seriously increased the limits without me asking.
I eventually had to tell them to stop and soon after got rid of it.

On a 35k salary, the credit card limit was over 10k. Absolute madness.


The point being the banks were throwing credit at people including mortgages

DaveyDave

Interesting hearing about these old mortgages, when we applied last year several banks wouldn't consider my full salary because I work shifts and capped my shift allowance at 20% of my base salary so I was losing around €6,000 off the annual amount or €21,000 off a mortgage at 3.5x. I worked the same shift for almost 3 years at the time, guaranteed same hours every week.

They also lumped overtime and bonuses into the same 20% cap so that was another regular €2k a year lost.

Hopefully the 3.5x rule sticks around. 20% of mortgages can be exempt from the 3.5x or 90% LTV rules if needed and from what I remember banks didn't hit that limit in the last year or so. Those stuck at 3.5x are there for a reason, giving them more 'just because' won't go well when we have banks leaving because of losses? The government should be looking at letting banks take houses back when people don't pay for 6-12 months then maybe our rates will go down and more people will be eligible for exemptions?

Smee_Again

Triangle wrote: »

Remember in 2003 ish times, I kept getting a credit card statement and every now and then the bank would have seriously increased the limits without me asking.
I eventually had to tell them to stop and soon after got rid of it.

On a 35k salary, the credit card limit was over 10k. Absolute madness.


The point being the banks were throwing credit at people including mortgages

2005 I applied for a credit card in BOI, I was on €21.5K basic plus commission of about €10K and they offered me a €15K limit. When I rang to reduce it to €1500 they tried to talk me out of it.

Flinty997

DaveyDave wrote: »

.... The government should be looking at letting banks take houses back ...

The govt will most likely sit on it's hands like it always has done. Which is where this all falls down.