Central Bank to limit amount banks lend for home purchase

handlemaster · 01-10-2014 5:58pm #1

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

El_Dangeroso · 01-10-2014 6:27pm

In my experience most banks want to lend 3X salary max, and I think I've queried with all the big ones.

mr_seer · 01-10-2014 8:42pm

handlemaster wrote: »

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

With annual house price inflation in Dublin of 25% plus, it is about time they intervened. Anyone who is in the "not a bubble" camp should take note

handlemaster · 01-10-2014 9:02pm

Buyers might also rush in before new rule takes hold

Lucy B · 01-10-2014 9:12pm

Great. Typical!! That is ridiculous. 3 times my husbands salary would not be enough for the house we want, we wouldn't want a huge mortgage, and would be able to easily repay the amount we want, but with this new rule we would be short about 40k. Will this really come in as a new rule soon??? Or would they base it on your affordability to repay? That makes more sense surely, not just a loose 3x or 4x your income, surely each case is unique?

mr_seer · 01-10-2014 9:15pm

handlemaster wrote: »

Buyers might also rush in before new rule takes hold

These measures will burst the Dublin bubble. Rushing in would seem to be pretty foolish

mr_seer · 01-10-2014 9:17pm

Lucy B wrote: »

Great. Typical!! That is ridiculous. 3 times my husbands salary would not be enough for the house we want, we wouldn't want a huge mortgage, and would be able to easily repay the amount we want, but with this new rule we would be short about 40k. Will this really come in as a new rule soon??? Or would they base it on your affordability to repay? That makes more sense surely, not just a loose 3x or 4x your income, surely each case is unique?

These measures could well reduce the price of the house you want by more than EUR 40k. If so you are significantly better off than over borrowing. People believe that generous bank lending benefits them but all it does is push house prices up

jimmycrackcorm · 01-10-2014 9:18pm

There would not have been a bubble had the banks stuck to the traditional 2.5 times main salary plus 1 x second

hmmm · 01-10-2014 9:20pm

About blooming time, what has taken them so long? Massive over-lending was one of the key abuses of the property boom.

Lucy B · 01-10-2014 9:24pm

mr_seer wrote: »

These measures could well reduce the price of the house you want by more than EUR 40k. If so you are significantly better off than over borrowing. People believe that generous bank lending benefits them but all it does is push house prices up

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?

Mongfinder General · 01-10-2014 9:29pm

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?

Spot on.

I wonder what legislation could be used to introduce a cap/ratio on lending for mortgages

red dave · 01-10-2014 9:59pm

Mongfinder General wrote: »

Spot on.

I wonder what legislation could be used to introduce a cap/ratio on lending for mortgages

There would have to be a cap on rents also if that were the case because rent prices would sky rocket if cap on lending introduced for mortgages?

mr_seer · 01-10-2014 10:05pm

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?

I agree completely that they should leave things be. As it stands it is the most manipulated and rigged property market in the world. The Code of Conduct on Mortgage Arrears, NAMA, State owned banks actively keeping supply away from domestic buyers, tax incentives for investors (CGT) and a massively inefficient legal system leading to zero repossessions (despite 25% PDH default levels) all mean that prices have been artificially inflated. If these points were addressed and we had an actual free market house prices would be about 50% lower but we would have a real and sustainable recovery happening by now. As it stands, we are in for another large downward correction IMO and it will bring the banks and possibly the public finances along with it

Victor · 01-10-2014 10:07pm

A number of rules should apply. In particular, they should look at the cases where people are in serious negative equity and/or behind in payments.

* Loan to value ratio should not exceed about 90-92%, based on the lower of the valuation of the property now and 12 months ago. This includes both buyers and developers.
* Account should be taken for the stage in the economic cycle.
* Repayments should not exceed about 30-40% of income.
* Approximately 2.5 times main salary plus 1 x second.
* Lending should account for the life stage people are at.
* No mortgages longer than 30 years.
* Fixed interest rates for the life of the mortgage should be available.
* Banks staff bonuses and commissions should be based on the performance of the loan over its life or a substantial part thereof.
* Exposure for any one bank to any one lending sector (by various measures) should be limited.
* More critical examinations of borrower income and expenditure need to be taken - lots of stories of falsified applications during the boom
* Banks should not be exposed to both sides of a property development transaction, i.e. lending / investing in the developer and more than a certain percentage of the buyers.
* The construction and property development industries should be separated, such that a business in one area should not be exposed to more than X% of turnover / assets in the other area.
* No one shareholder should be allowed hold more than a certain percentage of the shares of a bank. This should apply in particular to those involved in property development, the construction industry and their supply chains. This affected the Gallagher, Fitzpatrick and Quinn situations and proved to be a serious problem. Similar restrictions should also apply to directors and management.
* Banks should be prohibited from lending (more than a certain amount?) to staff, directors and possibly shareholders (who hold more than a certain percentage of share?).
* There should be a requirement for the periodic change of auditors of businesses, every 3-5 years.
* Vendors should be required to have draft contracts and independent property inspections before advertising the property for sale.
* Bids on property should be in writing and available for public inspection.
* Property tax rates should increase.

Lucy B wrote: »

Finish off ghost estates

Many ghost estates are ghost estates for a reason and should not be 'completed'.

MouseTail · 01-10-2014 10:10pm

Its just a consultation paper, its a long way from legislation or even self regulation yet. I think this is a cautionary measure in any case. Banks are currently conservative in their lending and would tend to fall at or below those mentioned.

Victor much of what you recommend falls outside the Central Banks remit.

johnp001 · 01-10-2014 10:23pm

mr_seer wrote: »

I agree completely that they should leave things be. As it stands it is the most manipulated and rigged property market in the world. The Code of Conduct on Mortgage Arrears, NAMA, State owned banks actively keeping supply away from domestic buyers, tax incentives for investors (CGT) and a massively inefficient legal system leading to zero repossessions (despite 25% PDH default levels) all mean that prices have been artificially inflated. If these points were addressed and we had an actual free market house prices would be about 50% lower but we would have a real and sustainable recovery happening by now. As it stands, we are in for another large downward correction IMO and it will bring the banks and possibly the public finances along with it

Although a lot of the interventions or manipulations mentioned above have stopped a stable property market from emerging I would be in favour of central bank intervening to limit the amount that the banks can lend because the banks have no reason to limit this themselves as their previous reckless lending was paid for by taxpayer bailout while all the short term profit of the reckless lending was enjoyed by the shareholders and bankers(in the form of bonuses etc)

Frank Lee Midere · 01-10-2014 10:24pm

Lucy B wrote: »

Great. Typical!! That is ridiculous. 3 times my husbands salary would not be enough for the house we want, we wouldn't want a huge mortgage, and would be able to easily repay the amount we want, but with this new rule we would be short about 40k. Will this really come in as a new rule soon??? Or would they base it on your affordability to repay? That makes more sense surely, not just a loose 3x or 4x your income, surely each case is unique?

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.

It's good though. Unlimited credit and limited supply would be a nightmare.

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

Frank Lee Midere · 01-10-2014 10:27pm

johnp001 wrote: »

Although a lot of the interventions or manipulations mentioned above have stopped a stable property market from emerging I would be in favour of central bank intervening to limit the amount that the banks can lend because the banks have no reason to limit this themselves as their previous reckless lending was paid for by taxpayer bailout while all the short term profit of the reckless lending was enjoyed by the shareholders and bankers(in the form of bonuses etc)

Yeah. The moral hazard from the last bubble was twofold: lenders learning they can lend what they want, and borrowers can borrow what they want.

Lucy B · 01-10-2014 11:20pm

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.

It's good though. Unlimited credit and limited supply would be a nightmare.

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

Yes, lol, a bit harsh!

No just annoyed to read the article as we have been saving hard and doing all the right things to buy the house we have been renting, and are so close now, literally months awY from buying, looking for average mortgage and have no interest in paying a lot for a house. Would rather have extra money to save or pay off mortgage asap. So feel that we are the sensible ones, we were going to buy back in the crazy days but felt it was just too much of an asking price for not so much house and carried on renting.

Anyway, hoping that the market will find some sort of equilibrium soon, it has to. Wonder will there be anything to help from the government in the upcoming budget???

flintash · 02-10-2014 12:07am

youre hopeless lads. do you really think the goverment is willing to help honest working Joe to obtain cheap propery? and even if so, would they manage not to screw up?
and look around the world- there is no cheap property anymore.so ireland wont be different.

quadrifoglio verde · 02-10-2014 12:10am

As much as I hate state interferance, sadly there are people in society who are too willing to overstretch themselves to buy a property that they can't afford and need protecting from themselves.
One only has to look at the levels of arrears to realise this, there's a lot of people in arrears simply because they borrowed more than they could afford too.

quadrifoglio verde · 02-10-2014 12:15am

Victor wrote: »

A number of rules should apply. In particular, they should look at the cases where people are in serious negative equity and/or behind in payments.

* Loan to value ratio should not exceed about 90-92%, based on the lower of the valuation of the property now and 12 months ago. This includes both buyers and developers.
* Account should be taken for the stage in the economic cycle.
* Repayments should not exceed about 30-40% of income.
* Approximately 2.5 times main salary plus 1 x second.
* Lending should account for the life stage people are at.
* No mortgages longer than 30 years.
* Fixed interest rates for the life of the mortgage should be available.
* Banks staff bonuses and commissions should be based on the performance of the loan over its life or a substantial part thereof.
* Exposure for any one bank to any one lending sector (by various measures) should be limited.
* More critical examinations of borrower income and expenditure need to be taken - lots of stories of falsified applications during the boom
* Banks should not be exposed to both sides of a property development transaction, i.e. lending / investing in the developer and more than a certain percentage of the buyers.
* The construction and property development industries should be separated, such that a business in one area should not be exposed to more than X% of turnover / assets in the other area.
* No one shareholder should be allowed hold more than a certain percentage of the shares of a bank. This should apply in particular to those involved in property development, the construction industry and their supply chains. This affected the Gallagher, Fitzpatrick and Quinn situations and proved to be a serious problem. Similar restrictions should also apply to directors and management.
* Banks should be prohibited from lending (more than a certain amount?) to staff, directors and possibly shareholders (who hold more than a certain percentage of share?).
* There should be a requirement for the periodic change of auditors of businesses, every 3-5 years.
* Vendors should be required to have draft contracts and independent property inspections before advertising the property for sale.
* Bids on property should be in writing and available for public inspection.
* Property tax rates should increase.

Many ghost estates are ghost estates for a reason and should not be 'completed'.

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

johnp001 · 02-10-2014 12:30am

quadrifoglio verde wrote: »

As much as I hate state interferance, sadly there are people in society who are too willing to overstretch themselves to buy a property that they can't afford and need protecting from themselves.
One only has to look at the levels of arrears to realise this, there's a lot of people in arrears simply because they borrowed more than they could afford too.

And society needs protection from them too as most of them are still living in those houses they cannot afford at the expense of the taxpayer via the state-owned banks.
In a functioning, non-corrupt state it would be assumed that effective lending limits should be imposed by the banks themselves. In Ireland, however, the regulator comprehensively failed to regulate and the banks profiteered due to this.
Some sort of limits need to be enforced by some entity with a vested interest in the long term stability of the economy.
The stability of the economy cannot be dependent on trusting that people will borrow responsibly. Particularly now that the effects of borrowing irresponsibly have been shown to be so positive for the individual at the expense of wider society.

The_Conductor · 02-10-2014 6:53am

quadrifoglio verde wrote: »

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

Depends on the lender- but some of them reduce recognisable net income by up to 1k per month, per child- so your net income goes down quite rapidly- and when you then have a rule that mortgage payments must equal less than 40% of net income- you see how borrowing capacity rapidly dwindles.

For the record- as a father of 2 young children where both parents try to work- childcare and sundry bills exceed the aforementioned 1k per month. You may get cheaper childcare down the country- but then you may have a lower gross income- or your transport costs may be higher- its all swings and roundabouts.......

Personally- given recent comments from Noonan- I can't see him signing off on the Central Bank proposals- though many of them are in fact elucidating actual practices in place in many lenders........

Also- I'd echo the shrewd comment by a poster a few posts up- who accurately observes that some people need to be protected from themselves. Its almost strange how many people see their maximum borrowing capacity- as a target to be met. Just because you can borrow 400,000 doesn't mean its a good idea to do so........

jmayo · 02-10-2014 10:51am

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?

High house prices and rapidly increasing house prices are not good for the economy.
They are great for those already insitu, but for everyone else especially younger generations starting out they are bad.
The one thing that has to be prevented is the availability of high amounts of cheap credit and this idea is exactly to try and prevent that.
I do think that the state of the Irish banks, the lack of foreign banks, the vigilance of the ECB/EU and the lack of cheap worldwide credit will be do this anyway.

Victor wrote: »

A number of rules should apply. In particular, they should look at the cases where people are in serious negative equity and/or behind in payments.

* Loan to value ratio should not exceed about 90-92%, based on the lower of the valuation of the property now and 12 months ago. This includes both buyers and developers.
* Account should be taken for the stage in the economic cycle.
* Repayments should not exceed about 30-40% of income.
* Approximately 2.5 times main salary plus 1 x second.
* Lending should account for the life stage people are at.
* No mortgages longer than 30 years.
* Fixed interest rates for the life of the mortgage should be available.
* Banks staff bonuses and commissions should be based on the performance of the loan over its life or a substantial part thereof.
* Exposure for any one bank to any one lending sector (by various measures) should be limited.
* More critical examinations of borrower income and expenditure need to be taken - lots of stories of falsified applications during the boom
* Banks should not be exposed to both sides of a property development transaction, i.e. lending / investing in the developer and more than a certain percentage of the buyers.
* The construction and property development industries should be separated, such that a business in one area should not be exposed to more than X% of turnover / assets in the other area.
* No one shareholder should be allowed hold more than a certain percentage of the shares of a bank. This should apply in particular to those involved in property development, the construction industry and their supply chains. This affected the Gallagher, Fitzpatrick and Quinn situations and proved to be a serious problem. Similar restrictions should also apply to directors and management.
* Banks should be prohibited from lending (more than a certain amount?) to staff, directors and possibly shareholders (who hold more than a certain percentage of share?).
* There should be a requirement for the periodic change of auditors of businesses, every 3-5 years.
* Vendors should be required to have draft contracts and independent property inspections before advertising the property for sale.
* Bids on property should be in writing and available for public inspection.
* Property tax rates should increase.

Many ghost estates are ghost estates for a reason and should not be 'completed'.

Great ideas Victor, but shag all use if the powers that be (i.e. regulators, Dept of Finance, government) are unwilling to actually implement the rules and regulations.
We actually had rules in place to prevent some things, but the people implementing them were too busy turning a blind eye, probably too interested in ar**licking in order to get their feet under a bank desk or on a bank board.
Dear God does anyone not realise that the first IFRSA cheif actually asked an AIB internal auditor to withdraw his allegations that the bank was overchagring it's own customers.

That would be like the local Garda superintendent asking a witness to withdraw their statement about a crime.

As you alluded to above, we had learnt enough lessons dating back to the 70s with Ken Bates, Patrick Gallagher, joe Moore, etc that we should never have allowed the fitzpatricks or fingletons do what they did.
But we did.

Not for one minute excusing gimps like neary, o'reilly, hurley, but as can be seen by the recent Goldman Sachs Fed tapes, regulators worldwide are still up the holes of the major financial institutions.
How we solve that I don't know.
Prevent regulators quickly getting high paying jobs with banks ?

One of the biggest thing that needs to be overhauled within the banks is the bonus structure.
As long as bankers are rewarded for selling loans and fancy financial instruments they sure as hell will keep doing it.
And I don't think that has changed at all since the bust.
Sometimes I think the only thing that will change things is a complete implosion.

P. Breathnach · 02-10-2014 11:24am

Victor wrote: »

A number of rules should apply. In particular, they should look at the cases where people are in serious negative equity and/or behind in payments.

* Loan to value ratio should not exceed about 90-92%, based on the lower of the valuation of the property now and 12 months ago. This includes both buyers and developers.
* Account should be taken for the stage in the economic cycle.
* Repayments should not exceed about 30-40% of income.
* Approximately 2.5 times main salary plus 1 x second.
* Lending should account for the life stage people are at.
* No mortgages longer than 30 years.
* Fixed interest rates for the life of the mortgage should be available.
* Banks staff bonuses and commissions should be based on the performance of the loan over its life or a substantial part thereof.
* Exposure for any one bank to any one lending sector (by various measures) should be limited.
* More critical examinations of borrower income and expenditure need to be taken - lots of stories of falsified applications during the boom
* Banks should not be exposed to both sides of a property development transaction, i.e. lending / investing in the developer and more than a certain percentage of the buyers.
* The construction and property development industries should be separated, such that a business in one area should not be exposed to more than X% of turnover / assets in the other area.
* No one shareholder should be allowed hold more than a certain percentage of the shares of a bank. This should apply in particular to those involved in property development, the construction industry and their supply chains. This affected the Gallagher, Fitzpatrick and Quinn situations and proved to be a serious problem. Similar restrictions should also apply to directors and management.
* Banks should be prohibited from lending (more than a certain amount?) to staff, directors and possibly shareholders (who hold more than a certain percentage of share?).
* There should be a requirement for the periodic change of auditors of businesses, every 3-5 years.
* Vendors should be required to have draft contracts and independent property inspections before advertising the property for sale.
* Bids on property should be in writing and available for public inspection.
* Property tax rates should increase...

Some good ideas there, worth debating. I would not agree with every one of them, but when anybody puts so many ideas out there in one batch, it's unlikely that people will agree with every one of them.

You have touched on the idea of conflict of interest, a matter that has not, in my opinion, received sufficient attention; it is undesirable that a financial institution finance a developer and also finance that developer's customers. The problem is that the banking sector operated like a quasi-cartel: while I do not think there was deliberate co-ordination, the banks as a collective reinforced one another's bad decisions.

My personal idea of a simple fix is to abolish the model of mortgage lending with recourse. If the banks operated in the knowledge that their security was limited to the net proceeds of the sale of a property, they might adopt more prudent policies. [I would allow some recourse if there is evidence of strategic default.]

uli84 · 02-10-2014 1:17pm

Rule, not rule, i only got 2 x my gross salary but then i ve got a baby

mannurse · 02-10-2014 1:29pm

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.

3DataModem · 02-10-2014 2:05pm

Lucy B wrote: »

and would be able to easily repay the amount we want

I presume you mean at the current unbelievably low interest rates?

GinaI · 02-10-2014 5:58pm

I keep wondering, when I hear an advice not to buy, where someone who was renting for the whole life, will live when they retire and have no salary to pay their rent anymore? I don't believe pension will be enough to cover rent...so? what is the solution?

Lucy B · 02-10-2014 6:13pm

3DataModem wrote: »

I presume you mean at the current unbelievably low interest rates?

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

Icepick · 02-10-2014 7:24pm

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 · 02-10-2014 7:26pm

Icepick wrote: »

Public & Civil service

Care to elaborate?

NZ_2014 · 02-10-2014 7:36pm

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 · 02-10-2014 7:37pm

NZ_2014 wrote: »

I see your point but not everybody wants kids.

People change their minds.......

moxin · 02-10-2014 7:46pm

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 · 02-10-2014 7:49pm

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 · 02-10-2014 7:55pm

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 · 02-10-2014 8:00pm

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 · 02-10-2014 8:02pm

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 · 02-10-2014 8:21pm

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 · 02-10-2014 8:37pm

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 · 02-10-2014 8:59pm

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 · 02-10-2014 9:21pm

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 · 02-10-2014 9:28pm

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 · 03-10-2014 6:05am

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 · 03-10-2014 6:35am

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 · 03-10-2014 7:53am

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.

03-10-2014 9:37am

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 · 03-10-2014 9:43am

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 · 03-10-2014 9:53am

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.

Central Bank to limit amount banks lend for home purchase

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