I think that the limit should be 3.5 times.
But for lower incomes, it should be much lower.
If someone were on a salary of €100k, it is ok to lend them €500k?
Brendan
The people drawing up the guidelines on the high spec for emissions and energy profile of new homes are also not concerning themselves with social issues. Would it be prudential of them to do so? They would argue they have a remit to achieve certain energy targets not to increase housing supply. Something about a situation where we have such narrow remits and cross purposes doesn't add up to me...
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.
I just think coming out and stating that the actual rules are absolutely correct is a very strong claim
So the solution is to 'lock and load' those without the rich parents so they can compete at the same level. Debt spiralWhat's happening now?
Wealthy parents buying houses for their children and wealthy investors are buying properties to take advantage of spiralling rents.
And with regard to the exemptions, banks are cherry picking customers. Given the choice between and accountant and a Garda, they choose the former.
These rules are creating fundamental issues in our society and are compounding inequality.
These rules are creating fundamental issues in our society and are compounding inequality.
These rules are creating fundamental issues in our society and are compounding inequality.
But Brendan, prices are not falling because of the rules. They are increasing modestly.
And the exemptions are being used to cherrypick the wealthy of the future (trainee professionals). Banks should be protected through higher capital requirements, not through social engineering.
Simply a return to 90% maximum LTVs for everyone because 20% is a ridiculous number to have to come up with.
I have already posted the Central Bank's loan level data that shows that losses increase significantly on defaults for loans with an LTV over 85% at origination. Internationally, LTVs over 80% would be considered very high risk from a lender's perspective. LTVs over 80% carry a higher risk weighting under Basle II and lenders have to set aside additional capital for such loans. In the US, borrowers are required to take out (very expensive) additional insurance (PMI) to provide additional protection to a lender once an LTV exceeds 80%. It seems to me that the general 80% LTV limit is entirely appropriate.
I am not sure what you mean here. Are you implying that the rules are causing prices to rise? I presume not, but I am confused. By limiting excessive credit, it's likely that the effect of the rules is to reduce prices, all other things being equal
I would have preferred a US insurance style approach rather than a restriction. It would allow for a situation where it makes financial sense for the bank to offer the 80% loans even accounting for the insurance costs.
OK, so you agree that the 90% is appropriate for first time buyers? Personally, I think it's too high. It's too risky for both sides.
The main problem is that people can't get on the ladder so it's probably ok to take extra risk and let them borrow 90%.
On that point though, I can't understand why it's done as a multiple of gross earnings: it would make more sense if it were based on net income.
In my submission, I suggest that other borrowings should be taken into account. For example, if someone has a €20k car loan, it should be deducted from the amount allowed to be borrowed, but the CB rejected this.
I read the so-called empirical research that concluded that FTBs have a lower default risk than other borrowers and I didn't find it particularly convincing.
In my submission, I suggest that other borrowings should be taken into account. For example, if someone has a €20k car loan, it should be deducted from the amount allowed to be borrowed, but the CB rejected this.
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