My final submission

Brendan Burgess

Brendan Burgess

Founder
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My submission is attached. Here is the summary

Contents and summary
The economic outlook is uncertain so it pays to be careful
Reckless borrowing hurts the borrowers themselves most of all
The Central Bank is right to impose limits as borrowers cannot be relied upon to borrow prudently and lenders cannot be relied upon to lend prudently
This is the right time to introduce the lending restrictions
The limits should be phased in
The international evidence supports an LTV limit of 80%
Account must be taken of unsecured debts
The LTV limit and the LTI limit should be integrated
While the current severe shortage of housing persists, it may be necessary to allow exceptions for new houses
The proposed limits will, on balance, help first-time buyers
Until government policy is altered to facilitate first-time buyers, it may be necessary to allow them to borrow 85% LTV
The high cost of building new houses is due to government policy. The Central Bank should not allow reckless borrowing to compensate for bad government policy
The government should make it easier for first time buyers to save the deposit
A person trading up to a second-hand house should have an absolute limit of 80% LTV
Mortgage Indemnity Insurance should not be allowed to facilitate reckless borrowing
Residential Investment Properties
A note on mortgage terms and interest-only mortgages
Some miscellaneous suggestions
 

Attachments

  • Submission by Brendan Burgess.docx
    28.1 KB · Views: 41
A good submission Brendan, and I hope your points are taken on board, if the state has to save people from the consequences of their own actions, this is probably a good way to go about it.

However


Brendan Burgess said:
Contents and summary
....
While the current severe shortage of housing persists, it may be necessary to allow exceptions for new houses
.........
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This just tees up a future government to take pro-cyclical action in any future boom.

If the 20% deposit requirement is put in place, it will create a pent up demand, that some future politician will release by reducing the requirement, prices will go up, (I by the way will sell all my properties and make a fortune) and sure as night follows day the bust will come again.

Any limits must be immutable or they will simply fuel pressure for a future boom.
 
Mortgage Indemnity Insurance should not be allowed to facilitate reckless borrowing
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I have made the point on a number of occasions that there is no correlation between MII and lending risk. Brendan you are entitled to your opinion on this issue but as yet you have provided no explanation as to why you believe MII cover can lead to poor quality lending. While I note that submissions can be made by everyone, a good submission should be backed up by hard facts which clearly make the case for any recommendation.
We all have opinions and some are right and some wrong. But legislation changes should not be based on either opinion or unsupported conjecture. These changes will have an impact on most borrowers but predominately those who are in the unfortunate position of having good affordability but lack the ability to amass a 20% deposit through high rent costs or a lack of parental support.
Yes I suppose I have no choice now but to put in my own proposal which will try to highlight these concerns !!
 
My Submission:

That the proposed new limit of 80% should be increased to 90% where mortgage indemnity insurance is provided by an acceptable insurance company for the remaining 10%.

Rationale;-
1. There is no correlation between LTV and affordability to repay a mortgage. The issue of LTV relates to collateral risk only and not to repayment risk. I.e. A correlation would only be established if the requirement was further expanded to include the provision of a satisfactory savings record in respect of the 20% input.
2. While an LTV restriction will predominately affect first time buyers (FTB), I accept that this is not in itself a rationale for either eliminating or increasing it. However provided that the insurers medium term ability to cover the 10% potential payout is adequately assessed then there is no logical reason for excluding MII cover as part of the overall LTV limit. I.e. In both circumstances the risk of a >20% reduction in property price is covered.
3. Many of those who are currently renting property will be unfairly disadvantaged. I.e. A FTB who is living with parents may be living rent free and will be in a much stronger position to save the required deposit than someone on similar earnings in rented accommodation. However, their ability to service a mortgage will be the same after the loan is drawn-down. Similarly 2 equal earners can amass deposits through different means. Ie. Gifts rather than savings.
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I still prefer being the hurler on the ditch :D
 
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