€220k cap on 90% LTV gone completely; 5% of FTBs to be allowed borrow >90% !

Discussion in 'The Central Bank's 2016 review of mortgage limits' started by Brendan Burgess, Nov 18, 2016.

  1. Brendan Burgess

    Brendan Burgess Founder

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    Last edited: Nov 23, 2016
  2. Sarenco

    Sarenco Frequent Poster

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    RTE reporting that Central Bank rules to be revised so that FTBs will only require 10% deposit regardless of house price - €220k cap will go.
     
  3. Brendan Burgess

    Brendan Burgess Founder

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    Outcome of Review of Mortgage Measures announced



    § Review confirms that the overall framework is appropriate and the measures have contributed to financial and economic stability.

    § Review based on extensive analytical work and public consultation.

    § Refinements to improve the effectiveness and sustainability of the measures.

    *** More detail at press conference today at 14:30***



    The Central Bank of Ireland today (23 November) announced the outcome of the review of the mortgage measures, following an extensive consultation and evaluation process. The mortgage measures were introduced in February 2015 to enhance the resilience of both borrowers and the banking sector.



    The review affirms that the overall framework is appropriate and the measures are contributing to financial and economic stability, reducing the risk of unsustainable lending and borrowing.

    Following the review, the framework is broadly unchanged. The 3.5 times ceiling on the loan to income (LTI) ratio remains. Requirements for buy to let borrowers and the exemptions for negative equity mortgage borrowers from the measures also remain unchanged.



    The review identified a number of refinements to improve the sustainability and effectiveness of the current framework.



    The refinements are:

    § The ceiling on the loan to value (LTV) ratio for all first time buyers will be set at 90 per cent. This is a shift from the current requirement, which puts the ceiling at 90 per cent for loans up to €220,000 but at 80 per cent for the balance of loans above €220,000. This means that first time buyers will be able to borrow up to 90 per cent of a value of a home, with a requirement for a 10 per cent minimum deposit.

    § The 20 per cent minimum deposit requirement (i.e. maximum LTV ratio of 80 per cent) continues to apply to second and subsequent buyers.

    § The structure of the proportionate LTV allowances is amended. Five per cent of the value of new lending to first time buyers will be allowed above the 90 per cent LTV limit and 20 per cent of the value of new lending to second and subsequent buyers for primary residences will be allowed above the 80 per cent LTV limit. This replaces the current requirement which allows 15 per cent of total lending for primary dwellings (the sum of lending to first time buyers and second and subsequent buyers) above the LTV limits.

    § The current two-month valuation period will be extended to four months in recognition of the fact that a portion of house sales can take longer than the average three months to conclude.



    All changes will be effective from 1 January 2017.



    Governor Philip Lane said: ‘Over the past 18 months, the measures have helped to ensure that those who buy homes are better prepared to manage their mortgage payments in the event of a future downturn in the economy or in the housing market. While our review process affirmed the value of the overall framework, some modifications to the measures were suggested by our evidence-based analysis.’


    ‘The 3.5 times ceiling on the loan to income ratio remains unchanged. The 90 per cent loan to value ratio limit for all first time buyers simplifies the overall framework, with only 5 per cent of lending permitted above this level. The 20 per cent allowance for lending above the 80 per cent loan to value ceiling for second and subsequent buyers is broadly in line with current lending patterns. The loan to value requirements for all other buyers will remain in place. Taken together, these measures constitute a sustainable framework to underpin our financial stability objectives.’


    The Central Bank has also published a report on the review process and a feedback document which responds to the submissions made during the consultation process. All submissions made in the consultation process will be published on the Central Bank website.



    A series of economic papers and additional research undertaken by the Central Bank during the course of the consultation has also been published.



    ENDS
     
  4. Brendan Burgess

    Brendan Burgess Founder

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    That is a very significant loosening.

    FTBs will be able to borrow up to 90% and 5% of them will be able to borrow more than 90%.

    20% of SSBs will be able to borrow more than 80%.



    Brendan
     
  5. Sarenco

    Sarenco Frequent Poster

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    Agreed Brendan.

    It will be interesting to hear the Central Bank's justification for the changes.
     
  6. SBarrett

    SBarrett Frequent Poster

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    Great news for FTB, especially those buying in Dublin.

    Have some sympathy on second time buyers who got stung with Celtic Tiger purchases and who still need 20% deposit but don't have any equity in a property to help them get there.

    Now all we need is a supply so there are a few more houses to buy!!

    Steven
    www.bluewaterfp.ie
     
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  7. Brendan Burgess

    Brendan Burgess Founder

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    On reflection, I don't think it will make that much difference.

    The existing restrictions allow them to exceed the 90%/80% on up to 15% of cases. They were not using their full allowances.

    I think that the banks' own credit standards may actually be higher than the CBs. Unless it acts as a signal to the lenders that the CB doesn't mind a return to reckless lending and the banks act accordingly.

    Brendan
     
  8. Brendan Burgess

    Brendan Burgess Founder

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    These changes won't push up the supply. They might well push up the prices for the limited supply that is there.

    Brendan
     
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  9. Sarenco

    Sarenco Frequent Poster

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    Not sure I agree that it's particularly good news for FTBs - they will simply have more firepower as a group to bid up prices - but it's certainly good news for banks and their brokers.
     
  10. willyfones

    willyfones Registered User

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    Great news for the Banks and Government, bad news for FTBs and everyone else. The Central Bank have caved to political pressure. I would expect to see a return to boom/bust style double-digit price increases next year. I don't agree that increasing debt on FTBs is a good thing. The Government could have reduced the cost of building, stopped land hoarding,, etc etc..
     
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  11. Andy836

    Andy836 Frequent Poster

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    Hmm, they should've left them as is.
    I presume that after a request for evidence from interested parties the CBI will be publishing the detailed report outlining the reasons for these adjustments.
     
  12. SBarrett

    SBarrett Frequent Poster

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    I know. That is the big problem. Loads of fields around where I live were bought during the Celtic Tiger. They're still just field. A few developments have gone up but it's really small developments. One of just 11 houses had 2 phases. The lowest cheapest price for the 2nd phase is €80,000 more expensive than the cheapest in the first!!!


    Young couples are struggling to get the deposit for houses in Dublin. For a €350,000 house, they need €48,000 deposit and over €5,000 for stamp, solicitor etc. They can't save quick enough to get the money together. It's certainly making it a lot easier for them to make a start.

    Not sure I agree with deposits less than 10% though for FTB. It will be interesting to see what the bank's criteria for lending in those circumstances are.


    Steven
    www.bluewaterfp.ie
     
  13. Delboy

    Delboy Frequent Poster

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    "The Government told us to do it after they were told to do it by EA's, Tom Parlon, American Vulture funds, Developers etc etc"
     
  14. Delboy

    Delboy Frequent Poster

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    Except now there'll be other 'young couples' with increased firepower also. Zero sum game except for the Vested Interests who'll make money off of the backs of said young couple
     
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  15. Allison1707

    Allison1707 Registered User

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    Well that's just bloody great! Nothing again for 2nd time buyers who have gone through so much to survive and pay their mortgage, on time, never defaulting, but now stuck in a shoebox with expanding family with saving for a 20% deposit, which could be 60k on a €300k mortgage, a dream for most.....vs (in my head) an inexperienced first time buyer with no outgoings getting their deposit from the bank of Mam+Dad? How is this fair? 1st time buyers should need 20% with 2nd time buyers only needing 10%..... And yes I'm fuming!!!
     
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  16. Merowig

    Merowig Frequent Poster

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    I don't have actually any money from my parents and actually I have to support my mother financially every month....
    2nd time buyers already are on the property ladder.
    Rent is expensive in Dublin - FTB have outgoings
     
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  17. Brendan Burgess

    Brendan Burgess Founder

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    I was at a presentation by the Central Bank this afternoon and I am probably happier with the changes now.

    Apparently the 10% up to €220k and 20% of the rest was confusing people. So the 10% for FTBs is much simpler for everyone to understand. 73% of FTBs buying for over €220k borrowed less than 90% anyway, so it won't have a huge effect. They are still subject to the 3.5 times Loan to Income, which is a brake on them borrowing too much.

    Given also that the banks are not using their allowance for exceptions, I am less concerned that there will be a free for all. It may push up prices a bit, but I don't think it will be that much of a change.

    Up to now lenders were allowed exceptions of 15% of the loan book for PDHs - FTBs and SSBs. In practice the SSBs were getting 2/3rds of the exceptions which amounted to probably around 20% of the actuall SSB lending. Now they have segregated the two books - lenders can make 5% exceptions for FTBs and 20% for SSBs. So it won't be any real change for SSBs.

    Brendan
     
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  18. moneybox

    moneybox Frequent Poster

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    Everyone's situation is different. It is very true that there are lots of parents who dont have a spare ten or twenty grand to dole out to their adult kids so it is unfair to generalize.
    Good on you for supporting your mum Merowig:)
     
  19. SBarrett

    SBarrett Frequent Poster

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    There's already queues outside the few new developments going up. There's also bidding wars over houses that in a state of disrepair. It's nothing to do with the Central Bank regulations or bank lending practices, which are still extremely strict. There's a massive shortage of properties for sale!! The Central Bank slightly relaxing the rules for a few won't solve that problem. House building needs to start up again but developers won't do so while costs are too high for them.

    Steven
    www.bluewaterfp.ie
     
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  20. phileasfogg

    phileasfogg Frequent Poster

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    I wish we could ban the phrase "property ladder". It's not very reassuring that some first time buyers don't know what negative equity is.
     
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