"Central Bank urged to row back on proposed mortgage rules "

[Brendan Burgess]

Yet, another headline from the Irish Times:

[broken link removed] has told the [broken link removed] that borrowers should be required to have a deposit of just 10 per cent if looking for a mortgage of up to €500,000, in a submission to the regulator about proposed new limits on lending.
[broken link removed], meanwhile, has urged the regulator to retain the current informal regime where customers can borrow up to 90 per cent of the purchase price of their property unless evidence emerges that prices are running ahead of the long-term average.
The [broken link removed] (IMHO) has argued that first-time buyers should be excluded from the new rules.

But if you read to the end of the article, you will find some support for the Central Bank

The Green Party said it favours the Central Bank’s proposed changes but cautioned that it must be part of a package of reforms to the housing and rental market.

 

[Delboy]

Morning Ireland reading out letters sent from people to the Taoiseach imploring him to force the CB to not bring in these rules...of course all the letters read out want the rules done away with. None read out that were in favour.
Some of those writing in were recently outbid on houses and feel prices are going out of their reach....and so they obviously want to borrow way more than they planned, rather than save more or wait for house prices to come down to a normal level.
They have EA's on now talking about how confused people are by the new rules

You couldn't make it up.

 

[Brendan Burgess]

Hi Delboy

I wonder how many were sent to the Taoiseach or the CB in favour?

If you know of any submissions in favour, let me know. I will compile them and send them to the media and the politicians.

Brendan

 

[Brendan Burgess]

And from the Indo today

New mortgage rules 'will send rents spiralling'

Now the IPAV says moves would push up rents further. Rents had already gone up 20pc in the past two months, the auctioneers said.
Pat Davitt of the IPAV called on Nama and banks to stop selling property portfolios and repossessed in blocks of units.
"The sale of these blocks of apartments will only give their foreign owners the opportunity to increase rents as they have done in the past two months by at least 20pc."

 

[Popper]

I have always been suspicious that the CB was merely kite-flying or carrying out a PR exercise when it came up with these proposals, and when push comes to shove it will dilute or postpone them.
This would be a bad mistake. It is only pushing the day of readjustment down the road when it will have to be even more painful. There is no question that some people will not be able to buy their own homes because of the proposed restrictions, and there will be a delay before their beneficial effects are realised in the form of stabilisation of house prices.
In the meantime, we need new fit-for-purpose residential tenancy laws along the lines of those in France and Germany. And if that requires a constitutional referendum, let's get on with it.

 

[44brendan]

I have previously made my views on this proposed change clear and backed up those views with a clear rationale of my position. The LTV restrictions are patently unfair to a large segment of FTB's and will in my view add nothing to prudential mortgage lending. Those who saw the programme on rental properties last night will have an appreciation of the potential impact on FTB's if this rule is imposed.

It makes no sense!!!!!!!!

 

[Delboy]

Hi Delboy

I wonder how many were sent to the Taoiseach or the CB in favour?

If you know of any submissions in favour, let me know. I will compile them and send them to the media and the politicians.

Brendan

Morning Ireland got the letters sent to the Taoiseach under a FoI request...wonder who tipped them off!

 

[serotoninsid]

It makes no sense!!!!!!!!

It makes complete sense. Firstly, people seem to forget - we're not just legislating for the Dublin market here - but the country generally. Additionally, does everything we consider have to be a short term knee-jerk reaction? Is anyone considering the longer term (positive) implications of this measure?


Secondly, there's a supply constraint in Dublin. Prudent lending policy should not suffer because of a supply constraint! That needs to be tackled in another way. i.e. whatever measures are necessary to increase efficiency of existing housing stock and bring new stock on-stream. With or without this measure, there is still going to be a supply constraint in Dublin.
People seem to be taking major issue with this measure. Where were they when the gov. introduced the cgt exemption? What did that measure do for FTB'ers? Meanwhile, government policy on the matter is inherently flawed as their take on it is that rising house prices is positive!


Thirdly, had these measures been in place 10 years ago, most likely I would not have had to compete with other buyers who were borrowing beyond their means. If I had not had to do so, I think its fair to suggest that having put down 27% deposit, I wouldn't have ended up with a home worth 55% of it's original value right now!


The catch phrase of 2014 in Ireland should be that people have short memories bordering on the amnesic.

 

[Delboy]

The Indo have picked up on the letters read out on MI on the radio earlier
http://www.independent.ie/irish-new...artbreaking-letter-to-taoiseach-30812421.html

"Dear Taoiseach,

"I am writing to you because of the 20pc deposit that the banks will be looking for in January for people to buy a home.
"My husband and I are youth workers.
"We work very hard and have been doing our very best to save 10pc, plus legal fees plus costs to buy basics for our house.
"Now with this new rule coming in, how can we possibly rent and save this amount?
"My husband and I put a bid on a house on Monday at €173,000.
"There was eight people bidding.
"Yesterday, the bid reached €199,000 and we had to drop out.
"It had gone way over the original value and our budget.
"This broke our hearts.
"We had loved this house since the minute we walked into it and now it's gone.
"Everyone is panicking because they are thinking how can we do this come next year?
"We already have a wonderful boy aged two, and would love in the future to have another child.
"But we honestly can't afford to.
"We are doing our very best to put every penny away but we have to live too. We have to have fun.
"We have to treat ourselves and buy something new and remind ourselves about what's good about being alive.
"Do you realise how much pressure this is putting on people's lives?
"Do you realise that my husband feels so guilty that he cannot provide enough for us as a family that he thinks we may be renting for the rest of our lives?
"And to be honest, I could get over that.
"But we want to build a home for our child - we have already been uprooted twice because we are renting.
"I think as I have gone on, I have clearly expressed how annoyed and frustrated I am with what is happening in Ireland.
"Most of all, I am sad and hurt.
"I am not blaming you. This is not an angry woman having a rant or being aggressive towards you.
"It's a woman who is scared at what the future holds for her family.
"I do believe and trust that you are the ones who can make a difference.
"Please help us save this country.
"Save the people and give them something to smile about."

Now, thats what I call a good old Indo story

 

[Brendan Burgess]

Morning Ireland reading out letters sent from people to the Taoiseach imploring him to force the CB to not bring in these rules...of course all the letters read out want the rules done away with. None read out that were in favour.
Some of those writing in .

Hi Delboy

I just listened back to it. To be fair to RTE, they had a long interview with Stephen Kinsella, an economist from the University of Limerick who supports the Central Bank's proposals

 

[Steven Barrett]

Some of those writing in were recently outbid on houses and feel prices are going out of their reach....and so they obviously want to borrow way more than they planned, rather than save more or wait for house prices to come down to a normal level.

This is it really. Buying a house is such an emotional time for people and they can lose the run of themselves and not think logically, 'If only I could have borrowed another €50,000, we'd be in our dream home'.

As with the adoption of new measures, it will hit some people harder but in the long run it will do good.

I read on another thread that Karl Deeter suggested the Central Bank adopting the current lending requirements. That would also work as they are very stringent at present and people really have to save.

As long as something meaningful is adopted.


Steven
www.bluewaterfp.ie

 

[44brendan]

Steven I cannot disagree with your comments. clearly overborrowing is a dangerous practise and both individuals and banks can often ignore prudential practises and end up with unaffordable levels of debt. This happened in the late eighties and again in the mid noughties.
Howver LTV limits have no direct corelation with affordability as I have previously mentioned. I would love to hear some arguements to the contrary! An LTv limit is initself a blunt instrument unless it is refined to a requirement that the amount must be backed by a regular savings record. Even in that event it does directly impact against the renters who cannot afford both to save for a deposit and pay the rent.
Why should these people be penalised. I.e. Should those people who have a good track record in paying a 1,500 monthly rent in Dublin be disbarred from taking out a mortgage at sa 1,200 a month purely because they don't have the additional capacity to save for the deposit. Why does this appear to make sense to so many intelligent people??
I have absolutely no vested interest in this issue, but I cannot for the life of me understand why those who support an 80% LTV think that they are doing home buyers a favour. It can only result in excluding renters from the buying market and force rents upwards!!!

 

[Delboy]

IMHO have said today they want ftb's exempted. So that's all the mortgage brokers against it then!!!

 

[Bronte]

I agree with 44brendan. I think 10% deposit is enough. And people who demonstrate an ability to pay rent of 1500 rent, can afford a mortgage of 1200.

I too have no vested interest. As long as there is a 3/4 tines salary cap as well this is no issue. It seems to me the CB are trapping people into the rental market, where rental supply is chronic. It's a total dream for landlords, of which I am one. So for me this CB proposal is beneficial as it traps tenants, not just from buying, but from moving. In addition I have some social welfare tenants, rent allowance is bound to go up, and as I was forced illegally by government, to reduce my rents, or evict my tenants, which I will not do, I will increase rents for those tenants if allowance rates rise.

Why on earth did it take the property market skyrocketing in Dublin before Honohan acted, what were he and his staff doing in the last five to ten years.

 

[serotoninsid]

An LTv limit is initself a blunt instrument unless it is refined to a requirement that the amount must be backed by a regular savings record. Even in that event it does directly impact against the renters who cannot afford both to save for a deposit and pay the rent.

It MUST be left as a 'blunt instrument' as you call it. You and I both know if this gets watered down (in the way that you mention or otherwise), it will be fudged and not strictly adhered to. That's all part of the country we live in and the way things get done here.

Why should these people be penalised. I.e. Should those people who have a good track record in paying a 1,500 monthly rent in Dublin be disbarred from taking out a mortgage at sa 1,200 a month purely because they don't have the additional capacity to save for the deposit. Why does this appear to make sense to so many intelligent people??

So people have to plan ahead - a number of years ahead. Good! That's the way it should be. Nobody should enter into this lightly.

Howver LTV limits have no direct corelation with affordability as I have previously mentioned. I would love to hear some arguements to the contrary!

Taking the supply issue out of the equation ( that can only be dealt with by other measures - and the fact that it is already an issue means that there will be no quick fix), how can reducing the funds available to prospective buyers do anything other than contribute towards dampening prices?

Yes, of course you say it doesn't matter because there is a supply constraint. Agreed. Then the pressure should be applied to Government to directly address that very issue. This very positive measure is not directly related to any such supply issue. outside of Dublin, how can this measure not play a part in 'grounding' house price inflation?

Lastly, as previously stated, legislative and policy changes are applied to the country as a whole. I don't want to see the rest of the country deprived of this simply because of peoples knee-jerk reaction to supply constraint in Dublin!


Where were all of these objections when the CGT exemption was introduced??

 

[Bronte]

Serotoninsid you mentioned the CGT exemption, not sure I get your point, it as in any case nothing to do with FTB's. For many would be landlords, and despite prices being low, or relatively low in Dublin, it's not enough of an incentive for investors to buy due to a) those burnt in the boom, b) those trapped as reluctant landlords c) those landlords who thought it was an easy option and got a rude awakening. Actually I wouldn't be a bit surprised if some of the 2013/4 purchasers are buying properties and leaving them empty for the next few years. Has anybody looked into that - I contemplated it myself.

 

[serotoninsid]

Serotoninsid you mentioned the CGT exemption, not sure I get your point, it as in any case nothing to do with FTB's. For many would be landlords, and despite prices being low, or relatively low in Dublin, it's not enough of an incentive for investors to buy due to a) those burnt in the boom, b) those trapped as reluctant landlords c) those landlords who thought it was an easy option and got a rude awakening. Actually I wouldn't be a bit surprised if some of the 2013/4 purchasers are buying properties and leaving them empty for the next few years. Has anybody looked into that - I contemplated it myself.

Government policy for this particular administration has been centred on rising property prices being a positive thing. The CGT exemption is symptomatic of that. I think it's fair to say that it has encouraged investors into the market - meaning your typical FTB'er has had to compete with said investor.
If you now say that some of these are now leaving properties empty, that only serves to underscore the point I'm making.

 

[Brendan Burgess]

IMHO have said today they want ftb's exempted. So that's all the mortgage brokers against it then!!!

 

[Brendan Burgess]

Why on earth did it take the property market skyrocketing in Dublin before Honohan acted, what were he and his staff doing in the last five to ten years.

Hi Bronte

Patrick Honohan was appointed Governor on 26th Sept 2009 and since then he has been dealing with more urgent issues such as bank recapitalisation.

Mortgage restrictions is the sort of important but not urgent issue.

Brendan

 

[Steven Barrett]

Even in that event it does directly impact against the renters who cannot afford both to save for a deposit and pay the rent.
Why should these people be penalised. I.e. Should those people who have a good track record in paying a 1,500 monthly rent in Dublin be disbarred from taking out a mortgage at sa 1,200 a month purely because they don't have the additional capacity to save for the deposit.

Having any deposit at all will always work against renters by the mere fact that they have less disposable income to save than those still living at home.

With the high demand, low supply at present, first time buyers simply cannot save quick enough to raise money for a deposit, whether they be living at home or renting.

The Central Bank needs to assess this very carefully. They have serious creditability issues at present. A complete climb down will cause them a lot of damage. I think an insurance scheme will be just as damaging. This whole exercise is to prevent reckless lending by the banks. To get the borrower to insure the banks risk will be just as reckless.


Steven
www.bluewaterfp.ie