Are second time buyers being put at a big disadvantage?

Discussion in 'The Central Bank's 2016 review of mortgage limits' started by Brendan Burgess, 24 Nov 2016.

  1. Brendan Burgess

    Brendan Burgess Founder

    I have heard a few people say this on the radio recently, and I might include the point in an article I am writing.

    The argument seems to be:
    First time buyers can borrow up to 90% so they have an advantage over second time buyers who can borrow less if they are competing for the same house.
    First time buyers get up to 5% of the price of a newly built house from the government, giving them more firepower than second time buyers.
    It is difficult for existing house owners who want to trade up, to sell their homes as first time buyers will be more interested in new houses as they can get 5% of the cost back in tax.

    Or the argument may be more general "nothing is being done for second time buyers who are stuck in unsuitable homes."

    First of all, the 80% LTV limit is appropriate. Second time buyers should not be borrowing more than this. The lenders are allowed to make up to 20% exceptions, so a second time buyer with a good credit risk who wants to borrow up to 90% will get a mortgage. (Most second time borrowers need less than 80% so most who want an exception will get one if the bank wants to give it to them.)

    Should FTBs be allowed to borrow up to 90%? The Central Bank claims that their research shows that FTBs default less often. If that is the case, then it's reasonable to lend them more than second time buyers.

    They do have a point about the 5% grant to First Time Buyers of new houses. It would give FTBs an unfair advantage if competing for the same house. In my view, FTBs should be able to save the 10% deposit themselves without government help.

    The overriding problem is the lack of building. And especially the lack of building of starter homes. It would have been much better to abolish VAT on all new builds, irrespective of the status of the buyer. That would have encouraged more building and would not have the discriminatory effect.

  2. SBarrett

    SBarrett Frequent Poster

    That is the key, there aren't enough houses. If the govt got rid of VAT on all new builds, they would have to abolish the tax break for FTB, you obviously can't have both.

    A lot of second time buyers are at a disadvantage because they haven't been able to build up equity in their Celtic Tiger homes. But then, in the boom, they had a ton of equity to release and FTB couldn't get anywhere near the required deposit (before 100% mortgages came in).

  3. Brendan Burgess

    Brendan Burgess Founder

    The second time buyers are finding it hard to trade up because they overpaid in the first place and don't have the equity to fund the 20%.

    Does giving FTBs 90% mortgages matter to the second time buyers? I suspect that it allows the FTBs buy the houses from the STBs which allows them to trade up, but only if they have the equity. If the FTBs were not allowed to borrow 90%, there wouldn't be much demand for the homes being sold by the STBs.
  4. Gordon Gekko

    Gordon Gekko Frequent Poster

    Perhaps FTBs will now bypass those starter homes meaning more trouble for the STBs?
  5. random2011

    random2011 Frequent Poster

    We were a second time buyer in the past month and only managed to get a deposit together because our NE meant we were exempt from CB deposit rules. We only required 10% versus 20%. If you have equity obviously you would be in a better position depending on the amount of equity and if this equity amount covered the 20% deposit for a trade up. But if you only have a 10% deposit and are in NE (even if just a bit) then people are in a position to trade up. In our case also we did not qualify for the 2% cash back offer which was only available to non NE trade up customers.
  6. PGF2016

    PGF2016 Frequent Poster

    First time buyers are finding it hard to save because they are paying so much rent.
    Second time buyers are struggling with negative equity.
    It seems as though everyone wants the situation manipulated to make it easier for them to buy the dream house.
  7. Brendan Burgess

    Brendan Burgess Founder

    Interesting point. Never thought of that. What mortgage rate are you now paying?

  8. random2011

    random2011 Frequent Poster

    4.3% MVR from PTSB. We also lost TRS but was expecting that. Our next aim now is to get to an LTV which will allow us to switch.

    I see a lot of discussion/articles stating that there is a low uptake on customers willing to switch. I think though there should be a breakdown between those who can switch but wont and those that cannot switch because of NE. If we could switch we would and I suspect we are included in the numbers who appear not willing to switch. It's a simple case of not being in a position to switch yet.
    Chantilly likes this.
  9. MajorTom

    MajorTom Registered User

    I would double check on the cashback offer for NE trade ups. I asked BOI about this previously and was told that cashback did apply to NE movers mortages.
  10. Bronte

    Bronte Frequent Poster

    Last edited: 26 Nov 2016
    Burgess is on Claire Byrne on RTE right now.

    - second time buyer is at a disadvantage
    -VAT is an issue in the cost of building.
    - Does not think CB changed their position due to political pressure
    - is happy about the 3.5 times income
    - doesn't think property will go up (I disagree )

    Others in studio, Patrick? And Thomas Byrne?

    Woman, is that Coppenger, says this doesn't help, crisis is mostly Dublin, and Cork. Attacking minister Harris. Says a range of housing needs to be built, and money is there. Now attacking developers. And Nama. Yes it's Ruth C.

    Michael O Regan giving a history of state building. Says the state used to do a good level of state housing. Historical failure.

    About the 20% supposed social housing builders requirement ended up with cash instead to buy their obligations out.

    BB: says problem is in both private buyers and those looking for social housing. Says you've a better chance of getting social welfare housing in your community. Says in Ringsend should not be social housing, only, that workers should get chance to buy and social welfare tenants should go elsewhere.
    Last edited: 26 Nov 2016
  11. Bronte

    Bronte Frequent Poster

    Last edited: 26 Nov 2016
    Ruth wants tendering thrown out!

    Says local authorities should build directly. Like they did in the seventies.

    Doesn't want public land sold to private builders.

    Burgess says getting a social house is winning the lottery - ! Says if the needs of a family change they should be reassessed so that homeless families from hotels move in.

    Ruth not happy with throwing people out, that they would go into hotels.

    BB has upset everybody. Told he's being too academic.

    Ruth says that older people in three beds would downsize, but, there is nowhere to put them. (BB how do you answer that?)
    Last edited: 26 Nov 2016
  12. aprentice

    aprentice Registered User

    We are at a serious disadvantage
    We paid €435k for our house in 2006 put our life savings in at the time €70k deposit.
    Borrowed €365k
    . Our house is now worth around €300k and we currently owe €290k paying 4.3% with ptsb and some overpayments

    .we missed out on being put on a tracker after our fixed rate ended .
    It's been a long slog to this point paying 2k plus mortgage per month
    And now with 2 kids in a house that's too small we will just about have 10% with equity and savings .
    But none of the CEntral bank or budget announcements will do any good for us
    The only thing that may happen is if prices jump a little we will benefit from higher equity to bring us closer to 20%
  13. Sarenco

    Sarenco Frequent Poster

    Last edited: 27 Nov 2016
    Leafing through today's papers, it strikes me that there is a strong consensus amongst commentators that, following the loosening of the Central Bank's mortgage rules, the propsed FTB tax rebate is:-
    1. Unnecessary;
    2. Unfair to SSBs;
    3. Overly inflationary; and
    4. A very poor use of scarce State resources.
    If this is the near unanimous view, is there a possibility that the Government will now drop the proposed FTB tax rebate? While that would perhaps be embarrassing for Minister Coveney, it would seem to be pretty obviously the right thing to do.

    If the FTB tax rebate does make it onto the Statute book, I would advise any eligible FTB to claim it ASAP as I can't see it lasting for too long.

    I also see that FF are saying that the impact of the FTB rebate should be reviewed next September!:rolleyes:
    Last edited: 27 Nov 2016
  14. Bronte

    Bronte Frequent Poster

    BB - if social housing tenants want to downsize or would be willing to do so, is there not a problem as to where they would go. As there is zero supply currently. If it was a policy that people had to downsize when the family left home but there is no supply these people would end up in hotels.

    It was clear from the radio show nobody was in favour of such a policy. Your point that regular people do this kind of thing all the time was not emphasised enough. Nor was it emphasised that regular people can not choose to live in the area one was brought up in because one can't afford it. I don't think anyone should be entitled to live in a certain area. But this does not mean I think Dublin people should have to move to Leitrim for example. Or to put it more simply, many people would love to live in Ballsbridge, but the prices are too high so people live elsewhere.

    One point on the downsizing. Many of us intend to do that, to take the equity out and have a more manageable house, plus some cash, also a house more suited to our elderly needs. Also possibly means moving to a better location or the same location but in a cheaper house. But people in social housing, they have no equity to take out, so there is no incentive for them to move, that combined with the fact they won't be offered somewhere smaller in their current location probably is a big disincentive to them.
  15. Bronte

    Bronte Frequent Poster

    I'm amazed that the default rate for second time buyers is higher than FTB. Why is this? Is this a celtic tiger thing? I would actually have thought second time buyers were more careful as they were older and wiser.
  16. JPSaltee

    JPSaltee Frequent Poster

    I built a house in the country on family land in 2006 with the plan to move home from Dublin, crash happened & there are no longer any suitable jobs in the area. So we rent in Dublin, therefore we are paying a high rent which will increase considerably at next review (we estimate by an additional €800 pm) so we are looking to buy as a mortgage will be cheaper than the rent. Getting together the 20% whilst paying rent is v hard & we are bidding against FTB's who have similar savings to us but need less deposit & many seem to parental financial support.
  17. Merowig

    Merowig Frequent Poster

    Is renting the home you built or even selling it an idea? Or did the job situation improve again where you built originally?
    Don't forget you were once a FTB as well

    The problem is not that FTB have it a bit easier (which is fine) - the problem is that not enough houses are built. Supply is here the main problem.