Brendan Burgess
Founder
- Messages
- 52,197
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I am not convinced that the Central Bank guidelines are absolutely correct.
Did we really some of the toughest restrictions on income ratios e.g. 3.5 and 20% deposits?
Does the 3.5 income ratio really make sense at all levels of income?
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We didn't seem to have irresponsible lending in the 1990s, yet we didn't have these levels of restrictions in place (either by banks or regulator). What changed was that the banks went a bit mad when they had access to the Euro (which led to 100% mortgages), and in the Euro we couldn't raise interest rates to dampen down the property market.
So you are saying that it is OK to raise interest rates to curb lending and dampen down the property market, but it is not OK to use LTV's and LTI's as a measure?
So if the CB restrictions are preventing people from taking out low risk mortgages that they an afford and would enable them to purchase new homes, they are wrong.
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.
In Dublin, the average price of a family home is €400,000 (source MyHome.ie). The Central Bank rules mean that someone must accumulate a deposit of €80,000, and have income of €91,000.
In Dublin, the average price of a family home is €400,000 (source MyHome.ie). The Central Bank rules mean that someone must accumulate a deposit of €80,000, and have income of €91,000.
Mortages were capped at 90% for a long time, and we had no problems.
Mortages were capped at 90% for a long time, and we had no problems.
I'm not sure how you are defining an average family home but today's MyHome.ie report puts the median asking price for a 3-bed semi in Dublin at €285k and €399 for a 4-bed semi.
The data shows a sharp increase in the losses of defaulted loans with an originating LTV greater than 85%
In any event I don't see why the Central Bank should concern itself with social issues in formulating its mortgage lending restrictions. That's hardly the function of any prudential regulator.
Given that I said "€400k (source MyHome.ie)", I'd have thought that it was obvious that I was talking about the 4 bed semis.
The data may very well say that, but a fundamental issue is that the LTVs didn't cause the crisis. This was a once in a hundred year event. It's like we're obsessing about tsunamis and meanwhile nobody can live.
I would strongly disagree that mortgage lending at high LTVs (and high LTIs and DTIs for that matter) wasn't a major contributor to our banking crisis. All the available evidence would suggest otherwise.
Increasing the mortgage % limits will not solve anything when there is such little supply. It will only give people more money to bid against each other. Senseless
That's a strawman argument. I'm not advocating high LTVs. I'm advocating 90%.
But my main criticism of the Central Bank restrictions is noted earlier. I think they are more restrictive than they need to be.
Does 3.5 income ratio make sense for all income levels? I'd like to see the evidence why.
In the Central Bank's defence, their did build in a level of exceptions to the system for banks which is something good to see.
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