Central Bank to limit amount banks lend for home purchase

dr.fuzzenstein · 22-05-2015 3:51pm

Balmed Out wrote: »

Apparently aib, ulster, boi, kbc have agreed with Michael noonan to look at reducing standard variable rates and introduce simpler options by July.

As for Karl deeter, I think he used to post here. He often talks a lot of sense though I dont always agree and he is obviously somewhat biased.

Anyone know if EBS will be bringing down their rates? (he asked for no particular reason)

edit:
Don't see them in the link, but they are part of AIB, so maybe...
http://www.rte.ie/news/business/2015/0522/702949-michael-mcgrath-mortgage-rates/

AlmightyCushion · 22-05-2015 5:30pm

Bob24 wrote: »

Yes just saw that here.

Wondering what he offered them in exchange and is not telling us (someone has to pay for this).

It's there in the article. There's a bill currently in the seanad that gives the central bank the option to reduce interest rates. He also said that if they don't reduce interest rates he could bring in a large bank levy in the next budget.

dr.fuzzenstein · 22-05-2015 7:37pm

AlmightyCushion wrote: »

It's there in the article. There's a bill currently in the seanad that gives the central bank the option to reduce interest rates. He also said that if they don't reduce interest rates he could bring in a large bank levy in the next budget.

I fail to see the threat to the banks in the larger levy. They will take 2 seconds to pass it on to the consumer and go back to their smoked lobster lunch.

Bob24 · 22-05-2015 8:40pm

AlmightyCushion wrote: »

It's there in the article. There's a bill currently in the seanad that gives the central bank the option to reduce interest rates. He also said that if they don't reduce interest rates he could bring in a large bank levy in the next budget.

I think these are empty threats and he is just posturing to show his voters he is fighting bankers. If the central bank was to impose lower rates or the government to levy fines off the banks, who would that hurt? The banks' shareholders. Who is the largest (by far) shareholder? The government.

At the end of the day the only ways they can reduce interest rates is to offer them more taxpayer's money or to let them be more agressive with bad payers so that other mortgage holders don't have to subsidise them. I think either he offered them some of our tax money now, or he promised them they will be allowed to be more aggressive with people in arrears if FG wins the next election (I think that second option would be a win-win situation for FG and the banks).

AlmightyCushion · 22-05-2015 9:31pm

Bob24 wrote: »

I think these are empty threats and he is just posturing to show his voters he is fighting bankers. If the central bank was to impose lower rates or the government to levy fines off the banks, who would that hurt? The banks' shareholders. Who is the largest (by far) shareholder? The government.

At the end of the day the only ways they can reduce interest rates is to offer them more taxpayer's money or to let them be more agressive with bad payers so that other mortgage holders don't have to subsidise them. I think either he offered them some of our tax money now, or he promised them they will be allowed to be more aggressive with people in arrears if FG wins the next election (I think that second option would be a win-win situation for FG and the banks).

I can't see the government giving them any more money. Political suicide if they did, the opposition would have a field day. They brought in a bank levy in 2013 when the state had a bigger share of the banks than they do today. If they brought one in back then, they could easily do it again.

Bob24 · 22-05-2015 9:49pm

AlmightyCushion wrote: »

I can't see the government giving them any more money. Political suicide if they did, the opposition would have a field day. They brought in a bank levy in 2013 when the state had a bigger share of the banks than they do today. If they brought one in back then, they could easily do it again.

Yes they definitely won't give them anything in a direct manner, agreed. But telling them to reduce rates and not changing anything else (ie reducing their profits, or increasing their losses for some of them) is pretty much giving them tax money since the government is financially involved in most of them.

johnp001 · 05-06-2015 2:07pm

OECD calls for further macro-prudential measures be used to prevent exposure to a new bubble
Irish house price rises reminiscent of bubble, says OECD

“Further macro-prudential tools should be used, if necessary, to prevent investors becoming excessively exposed,”

Does "excessively exposed" equal "negative equity" in this context?
i.e. does the OECD see a danger of price drops in excess of the new deposit limits?

Michael D Not Higgins · 05-06-2015 2:20pm

johnp001 wrote: »

OECD calls for further macro-prudential measures be used to prevent exposure to a new bubble
Irish house price rises reminiscent of bubble, says OECD

Does "excessively exposed" equal "negative equity" in this context?
i.e. does the OECD see a danger of price drops in excess of the new deposit limits?

If the market were to keep at the pace it has taken recently (although I don't believe it will when the LTI/LTV limits properly kick in) then the bubble would easily outstrip the 10-20% deposit within a couple of years.

I think the 'if necessary' comment is the most salient aspect. It all depends on the progress of the housing market.

gaius c · 05-06-2015 4:02pm

johnp001 wrote: »

OECD calls for further macro-prudential measures be used to prevent exposure to a new bubble
Irish house price rises reminiscent of bubble, says OECD

Does "excessively exposed" equal "negative equity" in this context?
i.e. does the OECD see a danger of price drops in excess of the new deposit limits?

Personally I think that the OECD might be looking at either lagging or out-of-date data because the PPR shows that the market peaked last year with a considerable reverse last autumn/winter and then broadly flat-ish since.

Then the CB rules got brought in and we haven't really seen them take effect yet as 10% deposit AIP's haven't run out yet.

Give it another few months and see how things are going before making more changes.

leinsterdude · 06-06-2015 9:13am

four houses sold in my area, in a matter of two weeks, all well priced, worth what they sold for, stocks very low now, this is in Kilcullen, glad to see it to be honest, Im sure they do represent good value though, if you go 8 miles to Naas, the prices are far higher and not moving quite as fast.

09-06-2015 2:25pm

I'm kinda repeating a question/assertion posted on the Property Market 2015 thread so apologies if you also follow that one:

When will the Central Bank limits truly take effect?

We know they came in in February but that people who had mortgage Approval In Principle (AIP) have a months' grace - typically six months.

My guess is that a fair few of these AIPs have already washed out of the system and the remainder won't be drawn down.

If your approval runs out in August - six months after the rules came in - and you are not sale agreed yet, there isn't much time. Even if a house comes to market this week, by the time you see it, allow for second viewings, go through the bidding and then begin the legal process, time is against you.

Thoughts?

16-07-2015 10:34am

IMF Research Has Lessons for Ireland on House Price Inflation

The salient finding for us is that LTVs and DTIs are effective in reducing loan growth and improving the debt-service capacity of borrowers. But two IMF researchers say such measures were “not always” effective in curbing house price growth.

<snip>
Tentative Irish evidence points to moderation in the rate of price growth generally and a speedier advance in prices outside Dublin since the Central Bank stepped in. It’s still far too early, however, to say what the eventual impact of the Central Bank loan caps will be.

seamus · 16-07-2015 10:54am

I tend to agree with the article that the new rules have the potential to result in investors accelerating house prices beyond the lending ability of your average buyer. But that's dependent on it making sense to invest in the first place. I can't see anyone for a long time discussing property investment as a good bet in Ireland again.

At the individual level though, these rules can only really be positive and should protect borrowers from future economic downturns.

Just bought a couple of weeks back and so I was going through the documentation from our previous mortgage (obtained in late 2007), and it's quite incredible what we and the banks were doing.

The new lending rules meant that this time around, we were really pushing all of the envelopes in terms of what the bank could give us. Pushing past it in some areas. Combined we're earning 50% more than we were in 2007, and were looking for a mortgage that was just 7% larger than the one we got in 2007. And by jaysus did we have to fight for it. In 2007, we didn't really have to right at all. It was basically just handed to us.
But the end result of the new rules putting a regulatory cap on our borrowing is that our repayments on the new mortgage are 20% less than our repayments in 2007.

Which from our individual level gives us a lot more flexibility. We can realistically weather a relatively large drop in income without having to forgo basic household needs or think about restructuring our mortgage.

gaius c · 16-07-2015 10:54am

The purpose of the measures is not to reduce house prices. It's to protect the banks from the risks of over-lending against assets that may go down as well as up in price.

Perciville · 16-07-2015 10:55am

Deleted User wrote: »

When will the Central Bank limits truly take effect?

I'd imagine they'll start to take effect now for the non-FTBers at least. Any new properties coming online now should have fewer potential buyers, so less demand.

seamus · 16-07-2015 11:36am

gaius c wrote: »

The purpose of the measures is not to reduce house prices. It's to protect the banks from the risks of over-lending against assets that may go down as well as up in price.

No, agreed. But at the same time a regulator has a duty to consider the wider economic implications of any regulations that they make.

A measure which ensures that borrowers cannot overstretch themselves becomes self-defeating if it causes property prices to go beyond people's borrowing capabilities.

The ultimate aim of the rules is a stable and healthy mortgage market, overlending or underlending means that the market is in trouble.

gaius c · 16-07-2015 1:18pm

seamus wrote: »

No, agreed. But at the same time a regulator has a duty to consider the wider economic implications of any regulations that they make.

A measure which ensures that borrowers cannot overstretch themselves becomes self-defeating if it causes property prices to go beyond people's borrowing capabilities.

The ultimate aim of the rules is a stable and healthy mortgage market, overlending or underlending means that the market is in trouble.

BTL investors face even stricter rules on lending so it's unlikely they'll gain a competitive advantage on house buyers. You're taking Sindo scaremongering at face value.

The resources available to buy property are being reduced from the credit side. Unless that's matched by an increase on the cash-only side, property prices will drop.

gaius c · 16-07-2015 1:18pm

Perciville wrote: »

I'd imagine they'll start to take effect now for the non-FTBers at least. Any new properties coming online now should have fewer potential buyers, so less demand.

11th August is D day for 10% approvals AFAIK.

Perciville · 16-07-2015 1:24pm

gaius c wrote: »

11th August is D day for 10% approvals AFAIK.

In our own case, it's Aug 19th. I.e. funds must be drawn down by then.

jay0109 · 16-07-2015 1:27pm

But for Aug 11th/19th deadlines, the house would want to be sale agreed a few weeks at this stage and surveys etc done, in order to have funds drawn down by then.

So in theory, the current stock of 'For Sales' will all fall under the new rules regime

Perciville · 16-07-2015 1:39pm

jay0109 wrote: »

But for Aug 11th/19th deadlines, the house would want to be sale agreed a few weeks at this stage and surveys etc done, in order to have funds drawn down by then.

So in theory, the current stock of 'For Sales' will all fall under the new rules regime

Agreed.

seamus · 16-07-2015 2:24pm

gaius c wrote: »

11th August is D day for 10% approvals AFAIK.

BOI appear to be taking some liberties with this - they offer "house hunter" credit approval, which you then convert to full approval by simply providing the name of the house you want to buy and a valuation for it.

Both in turn are valid for six months each, so in theory some BOI approvals under the old rules may be valid until early 2016.

In reality those with "house hunter" approval will have to go sale agreed by early August if they want to buy a house under the old rules.

The numbers with this approval have to be very low, 3 figures or even less, but they could be there.

matt-dublin · 17-07-2015 10:01am

EBS have already been told by the CBI that's they've hit their limits now.

We've AIP until the 16th but have been told once we go sale agreed on our own we can get an extension.

gaius c · 17-07-2015 10:42am

matt-dublin wrote: »

EBS have already been told by the CBI that's they've hit their limits now.

We've AIP until the 16th but have been told once we go sale agreed on our own we can get an extension.

Source?

The_Conductor · 17-07-2015 10:47am

gaius c wrote: »

Source?

It has been in the media- the EBS have run completely roughshod over Central Bank rules- even the 5 million fine during the week is completely unenforceable (the fine was for historic breaches of lending and back office rules and procedures- and was brought to the CBI's attention by a whistle blower). I'm sure its been written about somewhere- I'll see if I can find a link for you.

jay0109 · 17-07-2015 12:11pm

Was that 5m fine not for INBS
http://www.irishexaminer.com/breakingnews/business/irish-nationwide-building-society-fined-5m-for-regulation-breaches-686557.html

gosplan · 17-07-2015 1:01pm

jay0109 wrote: »

Was that 5m fine not for INBS
http://www.irishexaminer.com/breakingnews/business/irish-nationwide-building-society-fined-5m-for-regulation-breaches-686557.html

Awesome stuff.

Did the central bank basically just fine what is essentially a publicly funded company €5 million?

I'm only surprised that someone somewhere had the cop on to say 'let's not bother collecting it'.

Central Bank to limit amount banks lend for home purchase

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