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Central Bank to limit amount banks lend for home purchase

handlemaster

http://www.irishtimes.com/business/sectors/financial-services/central-bank-to-impose-limits-on-home-loans-1.1948176

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Icepick

Frank Lee Midere wrote: »

You are a good example of why we have bubbles in the first place.

Edit. I was a bit harsh. They will take into account ability to pay. So 3x is an approximation.

No you weren't.

Frank Lee Midere wrote: »

As for the cost of building - why is it so high here?

Public & Civil service

The_Conductor

Icepick wrote: »

Public & Civil service

Care to elaborate?

NZ_2014

quadrifoglio verde wrote: »

I'd add that all couples of child bearing age, should be stress tested as such. Just because your both 26 earning 100k combined and have no children, doesn't mean that in 4 years time you won't have two kids with another on the way and one of the parents staying at home.

Correct me if I'm wrong but as far as I know couples with no kids are stress tested differently to those with kids, which always came across as strange as it only takes 9 months

I see your point but not everybody wants kids.

The_Conductor

NZ_2014 wrote: »

I see your point but not everybody wants kids.

People change their minds.......

moxin

Lucy B wrote: »

We will be able to repay our mortgage every month, if rates go up or down or up and up or whatever happens.

On your other post, if mortgage lending was restricted as proposed, all the other buyers with mortgaged finance will be in the same boat as you. Only those who have diligently saved are the winners, thats a good thing.
Cash buyers in their high numbers are an anomaly in 2014 because of the CGT incentive, crap savings interest rates and a buoyant rental market. They will dry up and move on to the next financial instrument with better returns, mortgage buyers will not disappear.

hfallada

mannurse wrote: »

Cash buyers are a problem. All that money that was lost in the crash wasn't lost. Someone has it. And they are spending it now on property as rents are going up. Population in Dublin is sky rocketing due to inward migration despite large amounts of outward migration. It's the uncontrolled rents that are the problem imo.
Was living near Eccles street, landlord called in one day to up the rent by 200 euro. A poxy multiple apartment converted fire trap. When we said it was not worth it he said that he would get 4 people in there that would pay. Its this attitude that is the problem.

Economist rarely agree on anything, but one thing they all pretty much agree on, is that rent control destroys a rental market. Its actually one of the first things you learn in College Economics. It works in the short term, but is a disaster in the long run.

It reduces supply as its no longer as profitable to rent houses. LLs stop spending money on their properties as they cant get a higher price if their property is more desirable( look at the state of NYC rent controlled apartments and you will see they are just about livable). Often properties will be let on the black market for a higher price. Meaning a LL might declare the official rent control rate, when in fact its higher and the exchequer loses out on tax on the higher rate. But most importantly less new rentals are brought to the market. Higher rental prices have resulted in sites being brought across the city, to be developed into student accommodation. With the poor rents of 2007, they would not have been built

hmmm

Frank Lee Midere wrote: »

As for the cost of building - why is it so high here?

Massive government taxes & interference. Just today we had the government saying they were going to enforce the 10% social housing requirement - which means that everyone actually buying a house in one of those estates, also has to pay extra to compensate the builder for the "free" houses that are being given away. Then you have levies, and you have the government setting wages for labourers.

This whole country is a racket to extract as much money as possible from the middle class.

padjo5

Makes absolute sense to have a sensible cap across the board, despite the fact it will not suit some people who may be looking to stretch themselves to get 'the place they want'. It's like the bar-man telling you when you've had enough, you mightened like it but it's in your own interests!!

quadrifoglio verde

NZ_2014 wrote: »

I see your point but not everybody wants kids.

Most people I know, even in their early 20s, want kids. Not today or tomorrow, but somewhere in there 30s. Then as the conductor says people change their minds, not to mention accidents happening. It wouldn't be prudent of a bank to not stress test couples of child bearing age for the average amount of children per family

NZ_2014

quadrifoglio verde wrote: »

It wouldn't be prudent of a bank to not stress test couples of child bearing age for the average amount of children per family

But they don't do this at the moment do they? Do the banks give a reason why they don't?

Do they do it in other countries? If so do they do it for single applicants too?

quadrifoglio verde

NZ_2014 wrote: »

But they don't do this at the moment do they? Do the banks give a reason why they don't?

Do they do it in other countries? If so do they do it for single applicants too?

Ive no idea whether they do it for single applicants, but if a person can get a mortgage these days as a single applicant, id hazard a guess at them being a safe bet.
As fas as I know they stress test you differently if you've kids, as naturally, you'll have less disposable income than if you don't have kids. The thing is, if you're a couple and you don't have kids, you should still be stress tested as if you did because most couples do. I know very few couples in their late 30s onwards who have kids, but didn't when they got a mortgage and are as stretched as can be.

is this username available

Govt are only floating this cause they'll be gone from power by the time they could ever push legislation through. When it all goes tits up in another couple of years they'll be able to say they tried. They've supported widespread manipulation of the market for the last few years.If they were really serious about this why didnt they propose it when they came to power?

There's only one game in town and none of the establishment can see past high property prices despite how it reduces both competitiveness and disposable income in the economy.

Next crash will be fun, given our starting position of low interest rates and high national debt!

MouseTail

is this username available wrote: »

If they were really serious about this why didnt they propose it when they came to power?

They did, it is in the Programme for Government.

is this username available

MouseTail wrote: »

They did, it is in the Programme for Government.

Fair enough, I didn't realise that. Wine induced rant withdrawn! Lets see if they push it through.

handlemaster

I note on the indo app this morning in the business section 13 articles on houses and 1 on bank lending. I guess houses are business again .

quadrifoglio verde

handlemaster wrote: »

I note on the indo app this morning in the business section 13 articles on houses and 1 on bank lending. I guess houses are business again .

Agreed but a functioning housing market is necessary for a functioning economy. Just not the scale that It was the last time.
One thing I can see causing problems is the new costs of development. Part 5, increased taxes and the new building regs with the new building regs being the biggest issue as they aren't cheap to meet. Due to these increased costs as well as the price of land in dublin, I can't see there being a great rush into development unless prices rise more, as the reward won't outweigh the risk.

MouseTail

Part 5 has been there a while hasn't it? What is different in the new reforms are Developers cannot buy their way out of it. The vacant land levy should also be useful to push land into development.
Another factor is the cost of labour, we are facing a chronic shortage of skilled construction labour in the mid term.

[Deleted User]

quadrifoglio verde wrote: »

Most people I know, even in their early 20s, want kids. Not today or tomorrow, but somewhere in there 30s. Then as the conductor says people change their minds, not to mention accidents happening. It wouldn't be prudent of a bank to not stress test couples of child bearing age for the average amount of children per family

I think it would be quite unfair for a bank to run a stress for a couple "maybe" having kids unless of course they are also willing to take into account that the couples income may very well increase also. The couple might have kids in 5 years but they could also be earning quite a bit more money through promotions , pay rises etc.

Ritchi

quadrifoglio verde wrote: »

I'd add that all couples of child bearing age, should be stress tested as such. Just because your both 26 earning 100k combined and have no children, doesn't mean that in 4 years time you won't have two kids with another on the way and one of the parents staying at home.

Correct me if I'm wrong but as far as I know couples with no kids are stress tested differently to those with kids, which always came across as strange as it only takes 9 months

What makes you think that this is not already taken into account?

For example, they look at two couples of the same age and income, one with kids, one without.

Couple A have a 100% of having kids, because they have them now.

Couple B have a 75% (made up figure, but I'm sure they can make assumptions based on age) of having kids at some stage.

They then work out how much both couples can borrow based on that.

I'm be pretty sure they do already take it into account.

Bob24

Lucy B wrote: »

Wouldn't that lead to something else though? As in all the house prices dropping? More people again would be looking to buy as prices would be cheaper, but people who own homes would be less likely to put their homes on the market as they wouldn't get the price they want for it??
Which would lead to more lack of supply? Vicious circle. Why can't they just leave things be? Finish off ghost estates, lend to builders/developers? Something positive?

If the government was letting things be in the property market, prices would probably be lower than they currently are. Rightly or wrongly it has been intervening like crazy for the past few years in a way which drove prices up.

quadrifoglio verde

Ritchi wrote: »

What makes you think that this is not already taken into account?

For example, they look at two couples of the same age and income, one with kids, one without.

Couple A have a 100% of having kids, because they have them now.

Couple B have a 75% (made up figure, but I'm sure they can make assumptions based on age) of having kids at some stage.

They then work out how much both couples can borrow based on that.

I'm be pretty sure they do already take it into account.

Maybe they do and I did say earlier, to correct me if I was wrong on it. Figures get thrown around about how much income that the banks require you to have if you've children, Im just pointing out, that they should take into consideration the possibilities of having children in the future into account.
At least I hope they feckin do, otherwise well be back on the merrygoround in another 10 years

Eldarion

quadrifoglio verde wrote: »

Maybe they do and I did say earlier, to correct me if I was wrong on it. Figures get thrown around about how much income that the banks require you to have if you've children, Im just pointing out, that they should take into consideration the possibilities of having children in the future into account.
At least I hope they feckin do, otherwise well be back on the merrygoround in another 10 years

Yeah but where do you draw the line? What if it's a single applicant of child bearing age? Do you charge more if the applicant is male or female? Now we're getting into shady territory. Or do you only discriminate on married couples or all joint applications?

What I could see happening, if this was standard practice, would be a lot of "single" male applicants applying for mortgages who get a much higher approval figure, buy the house and once the papers are signed all of a sudden meet their special someone and have a live-in girlfriend the next day.

Maybe we should be providing doctor's certs stating 100% guaranteed infertility with our mortgage applications.

Problem solved.

P. Breathnach

quadrifoglio verde wrote: »

Agreed but a functioning housing market is necessary for a functioning economy. Just not the scale that It was the last time.
One thing I can see causing problems is the new costs of development. Part 5, increased taxes and the new building regs with the new building regs being the biggest issue as they aren't cheap to meet. Due to these increased costs as well as the price of land in dublin, I can't see there being a great rush into development unless prices rise more, as the reward won't outweigh the risk.

If, as it appears to me, you believe in the free market then you have to think through the economics. In particular, you should recognise that the price of housing is determined by effective demand rather than by the cost of production. Developers in places like Leitrim have learned that at great expense.

You mention land prices in Dublin as a cost element, but you don't seem to have recognised that the high price of building land is a consequence, rather than a cause, of high housing prices.

quadrifoglio verde

Eldarion wrote: »

Yeah but where do you draw the line? What if it's a single applicant of child bearing age? Do you charge more if the applicant is male or female? Now we're getting into shady territory. Or do you only discriminate on married couples or all joint applications?

What I could see happening, if this was standard practice, would be a lot of "single" male applicants applying for mortgages who get a much higher approval figure, buy the house and once the papers are signed all of a sudden meet their special someone and have a live-in girlfriend the next day.

Maybe we should be providing doctor's certs stating 100% guaranteed infertility with our mortgage applications. Problem solved.

Thing is though, if your capable of getting a mortgage as a single applicant in this day and age chances are you can support a family as you need a decent income to do so.

P. Breathnach wrote: »

If, as it appears to me, you believe in the free market then you have to think through the economics. In particular, you should recognise that the price of housing is determined by effective demand rather than by the cost of production. Developers in places like Leitrim have learned that at great expense.

You mention land prices in Dublin as a cost element, but you don't seem to have recognised that the high price of building land is a consequence, rather than a cause, of high housing prices.

Of course the price of housing is determined by demand, what I was saying was that if juice aint worth the squeeze for the developer, then he isn't going to develop. He is driven by the desire to make profit and if the cost for him to build is less than what he can sell it for, he isn't going to build.
With this new part 5 rule, the new levy as well as building to higher standards and energy ratings, I don't know if we will see new builds in Dublin at an affordable price (couple with two kids on the average industrial wage).

P. Breathnach

quadrifoglio verde wrote: »

...
Of course the price of housing is determined by demand, what I was saying was that if juice aint worth the squeeze for the developer, then he isn't going to develop. He is driven by the desire to make profit and if the cost for him to build is less than what he can sell it for, he isn't going to build.
With this new part 5 rule, the new levy as well as building to higher standards and energy ratings, I don't know if we will see new builds in Dublin at an affordable price (couple with two kids on the average industrial wage).

As I suggested, take the economic reasoning through to the conclusion: if the cost of building goes up by more than do selling prices, the ultimate impact falls on the price of building sites.

Look at the price of building sites in Dublin: there is a lot of fat to be trimmed there.

Barely Hedged

handlemaster wrote: »

I note on the indo app this morning in the business section 13 articles on houses and 1 on bank lending. I guess houses are business again .

Is it because their property supplement is out on a Friday?

The_Conductor

Barely Hedged wrote: »

Is it because their property supplement is out on a Friday?

Spoilsport

Victor

It isn't about saying 'no' to potential or actual parents, but stress tests need to be put in place. And on balance, it is unlikely that a perfect storm of 20% interest rates, both partners losing their jobs, having 9 kids, pyrite, dry rot, asbestos, an oil tank that leaked, a nuclear disaster, while living next door to a drug trafficker will all occur while having defective insurance policies.

Eldarion wrote: »

Yeah but where do you draw the line? What if it's a single applicant of child bearing age? Do you charge more if the applicant is male or female? Now we're getting into shady territory. Or do you only discriminate on married couples or all joint applications?

What I could see happening, if this was standard practice, would be a lot of "single" male applicants applying for mortgages who get a much higher approval figure, buy the house and once the papers are signed all of a sudden meet their special someone and have a live-in girlfriend the next day.

Surely, one eligible bachelor has a lower earning potential than a couple, albeit should also have lower living costs?

Consider the following cases:
* 23 year old single male, no children. Potentially will marry and will have children.
* 25 year old couple, just married, no children. Potentially will have children.
* 33 year old couple, long married, one child age 1. Potentially will have more children.
* 38 year old couple, long married, children aged 14, 12, and 9. Unlikely to have more children.
* 43 year old single female, no children. Unlikely to have children. Lending will be restricted by expected retirement age of 60-68.

Each should only get a mortgage based on a multiple of current earnings, stress tested for likely life events.

Of course, a 28 year old male building a 4-bed house next to his parents' house - hmm, I think that's a hint that it won't be a bachelor pad.

Maybe we should be providing doctor's certs stating 100% guaranteed infertility with our mortgage applications. Problem solved.

Don't forget adoption.

NZ_2014

Victor wrote: »

Of course, a 28 year old male building a 4-bed house next to his parents' house - hmm, I think that's a hint that it won't be a bachelor pad.
.

Not necessarily. One room could be used as an office and another as a home gym, and another one as a snooker/pool table room.

The_Conductor

NZ_2014 wrote: »

Not necessarily. One room could be used as an office and another as a home gym, and another one as a snooker/pool table room.

People don't tend to do projects like this anymore- its not something people can afford. A proposal like this- would have alarm bells ringing in any credit assessment department- its so off-field........