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

Boyd

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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.
Depending on when they bought, there are plenty of non-FTBers who don't know what negative equity is also....
 

Boyd

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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
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
Yup, FTB friends of mine queued outside SoCoDu development for two hours recently, to find out that 16 of the 20 houses were already sold, due to people turning up with deposits in cash. Crazy.
 

phileasfogg

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Depending on when they bought, there are plenty of non-FTBers who don't know what negative equity is also....
But most who bought 6 to 18 years ago will be in negative equity. Those who bought before then may not be in nagative equity but less likely now to have a growing family and a huge need to move.
 

Brendan Burgess

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But most who bought 6 to 18 years ago will be in negative equity.
Doesn't sound right to me. Have you a source for this? I am guessing, without looking it up, that house prices are well ahead of where they were in 1998.

Even if they are not, most people who took out a mortgage 18 years ago, have paid down the mortgage substantially by now.

Brendan
 

Bronte

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But most who bought 6 to 18 years ago will be in negative equity. Those who bought before then may not be in nagative equity but less likely now to have a growing family and a huge need to move.
It would be next to impossible to be in NE if you bought in 1998. For various reasons. The bubble was just starting then. As Burgess has stated you've paid off 18 years. But also around 1998 mortgages longer than 20 years was the norm. You might have 25 years, but unlikely to have 35 years.

In relation the 6 years ago. That also can't be right. 2010. No way. If you said 2006 I'd agree.
 

SBarrett

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Doesn't sound right to me. Have you a source for this? I am guessing, without looking it up, that house prices are well ahead of where they were in 1998.

Even if they are not, most people who took out a mortgage 18 years ago, have paid down the mortgage substantially by now.

Brendan
Yeah, I'd agree. It would probably be those who bought from 2004 - 2007/8 that are in negative equity. And I would say the majority of those are apartment owners, who may never see the prices come back to what they paid. The demand isn't there for apartments.

Steven
www.bluewaterfp.ie
 

Bronte

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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
I haven't looked into this but this morning I heard that FTB can borrow 95% and I straight away thought of the mad Celtic Tiger and the 110% loans. While I totally agree with the change, as in a 10% deposit, I think 5% is pushing it to dangerous territory. But if they are keeping 3.5 times salary strict than that should be ok. Also would agree that if a borrower can show they have been paid rent equal to the amount a mortgage would cost to service that is a good thing. I see employement in Ireland seems to be back on track. I base this on my own relations. But also on the volume of traffic on the roads (obviously not Leitrim or Donegal etc). Mostly Dublin. I still see no major upturn though in some cities/large towns eg Sligo and Waterford.
 

Bobbyg

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It doesn't look like it will make much difference as the first time buyers can still only borrowing the same as before. For example a couple with the means to borrow €260k looking to buy a house for €300k would previously have had to save €38k deposit and approx €10k to cover the rest. The same couple can still only borrow €260k from January so would still require €48k saving to buy the same house despite the lower deposit needed. Unless i am missing something?
 

Sarenco

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Unless i am missing something?
Well, most FTBs don't actually borrow 3.5 times their gross income - on average they currently borrow 2.8 times their income.

The reduced deposit requirement, tax rebate and cash-back deals will, in combination, bring forward demand without any (short-term) increase in supply. In other words, more people will now be in a position to compete for a scarce resource (housing) and that will inevitably result in price rises given the constrained supply.

Another practical problem is that any LTI restriction is much easier to "cheat" than a hard LTV restriction - so called "liar loans" became an epidemic during the last bubble.
 

SBarrett

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The restrictions to FTB by the CBI have been completely relaxed. Say you have applied for an EBS mortgage. A few months ago you needed 20% deposit. Now what do you need ? EBS will give you 2% back, the Governmnet will indirectly give you 5% and now all you need is 10% deposit ( or could it be 3% ) The banks can also disregard the CBI provisions with regard to a percentage of mortgage applications! This coupled with an undersupply. ( btw the vulture funds must be laughing all the way to the bank ( tax free Cayman type bank ))
You're completely forgetting that FTB only needed 10% for the first €220,000. This was the average price of a house in Dublin. The average has now increased to €280,000. The CB stated that the constantly changing averages means they would have to review on an annual basis, so they just set it at 10% deposit. It is a benefit for FTB but is in no way a complete relaxation of the rules.

Bronte, the CB rules state that 5% of loans give to FTB can exceed the 90% LTV. It doesn't say anywhere that loans can be given up to 95%. In fact, it says these loans should be given in extraordinary circumstances.

People also have to remember why these rules were brought in; the CB don't trust the banks to continue with their prudent lending practices. At present, prudent lending practices apply (ask anyone who has recently got a mortgage how difficult it is). The real benefit of these rules is to keep pressure on the banks to continue with prudent lending.

The CB also highlighted the shortage of houses being built is the main cause of price increases.


Steven
www.bluewaterfp.ie
 
J

jjm

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We need to put in place a building program for first time buyers ,It was done back in the eighties .We should be working on full planning premission for new estates and making housing sites availabile to small builders or self build for that matter once they meet the required standard.
 

Bronte

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We need to put in place a building program for first time buyers ,It was done back in the eighties .We should be working on full planning premission for new estates and making housing sites availabile to small builders or self build for that matter once they meet the required standard.
What scheme was that?
 

phileasfogg

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My mortgage is 13 years old and I'm €100,000 in negative equity. I can't see my being at zero in 5 years unless there is a major increase in house prices. And yes it is an apartment. In hindsight I would have borrowed much more money and bought a house. Being " prudent" in amount borrowed had no rewards.
 

Sarenco

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My mortgage is 13 years old and I'm €100,000 in negative equity.
Wow. :(

Did you manage to make all scheduled repayments over a typical mortgage term of 20-30 years? Or is there some other reason specific to your apartment that has given rise to such a fall in value.

That's an unusually large level of NE for a property bought in 2003,
 

phileasfogg

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I made all payments. Never in any financial trouble of any kind, didn't borrow beyond my budget. Most of my repayments were interest for many years so only really bringing down principle amount in last few years. apartments were €330,000 and dropped to €90,000. Only very slowly regaining value. Similar apartment sold for €135,000 recently.
 

Sarenco

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Most of my repayments were interest for many years so only really bringing down principle amount in last few years.
Ah, that explains it.

I'm afraid interest payments are not repayments of the principal originally advanced to you by the lender.
 

Gordon Gekko

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There seem to be some extreme examples in terms of apartments. I'm surprised they go back to '03 however.

I paid €280k in '03 for a very nice apartment that's now worth around €300k. So how could your one have cost €330k and now be worth €135k?
 

phileasfogg

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Sorry I didn't mean interest only repayments. I meant most of the repayments were interest so principal went down very very slowly at the beginning. My apartment doesn't have pyrite or in a ghost estate! But now I'm worried why prices are so low if others seem to be out of negative equity!!
 
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