Brendan Burgess
Founder
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I had an article supporting the Central Bank's rules in yesterday's Sunday Independent. Here are some extracts:
Politicians and commentators are excoriating the banks for reckless lending during the boom while in the same breath they are criticising the Central Bank for setting responsible borrower standards for first-time buyers.
...
It's very difficult for someone struggling to get on the housing ladder to see the bigger picture. They think that if only the lender would give them just a bit more money and require a bit less of a deposit, they would be able to buy their dream house.
But unfortunately, it does not work like that. If the lending restrictions were relaxed for everyone, then it would just push up the prices of all houses - newly built and second-hand. So the aspiring first-time buyer would be in a worse position.
It would take them just as long to get on the housing ladder and when they did eventually achieve it, they would end up with a bigger mortgage. And because they would be a much riskier borrower, the interest rate they pay and their monthly repayments would be even higher.
So the Central Bank is absolutely correct to stand firm and demand that the lenders and borrowers behave responsibly. It is in the interests of the banks. It is in the interests of the borrowers. And it is in the interests of the taxpayers.
...
The real problem is that it is not profitable for developers to build new houses because the costs of building are simply too high.
And the only solution is to bring down the cost of building houses. Well-meaning government policies in recent years have led to this very high cost and the very low level of building.
...
It's time we started learning from the past. If we impose very high specifications and taxes on the buyers of new homes, we should not be surprised that they can't afford to buy them without reckless borrowing.
If we allow reckless borrowing, we should not be surprised when it results in mortgage arrears and bank failures.
Politicians and commentators are excoriating the banks for reckless lending during the boom while in the same breath they are criticising the Central Bank for setting responsible borrower standards for first-time buyers.
...
It's very difficult for someone struggling to get on the housing ladder to see the bigger picture. They think that if only the lender would give them just a bit more money and require a bit less of a deposit, they would be able to buy their dream house.
But unfortunately, it does not work like that. If the lending restrictions were relaxed for everyone, then it would just push up the prices of all houses - newly built and second-hand. So the aspiring first-time buyer would be in a worse position.
It would take them just as long to get on the housing ladder and when they did eventually achieve it, they would end up with a bigger mortgage. And because they would be a much riskier borrower, the interest rate they pay and their monthly repayments would be even higher.
So the Central Bank is absolutely correct to stand firm and demand that the lenders and borrowers behave responsibly. It is in the interests of the banks. It is in the interests of the borrowers. And it is in the interests of the taxpayers.
...
The real problem is that it is not profitable for developers to build new houses because the costs of building are simply too high.
And the only solution is to bring down the cost of building houses. Well-meaning government policies in recent years have led to this very high cost and the very low level of building.
...
It's time we started learning from the past. If we impose very high specifications and taxes on the buyers of new homes, we should not be surprised that they can't afford to buy them without reckless borrowing.
If we allow reckless borrowing, we should not be surprised when it results in mortgage arrears and bank failures.