Brendan Burgess
Founder
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- 52,122
The difficulties here is that there is a likely limit to maintaining payments at a certain level. Stressed RCR analysis would factor in an element of stress to the repayment ability which meeting actual payments do not."Look, we have proven our ability to repay this amount for the past two years as we have been paying this amount of rent".
Why should the deposit requirement be 20%, when having it at 10% didn't lead to any problems?
From a lending risk perspective we would always prioritise repayment capacity over collateral value.
What is the basis for the 3.5 times salary rule? Reduce this instead and allow 10-15% deposits.
The ESRI's idea that the Central Bank's macro prudential rules should somehow be connected to construction activity or some academic view of the prevailing supply/demand dynamics within the housing market is bonkers. How would that even work?
The aggregate level of mortgage debt being carried in Ireland is already extremely high by international standards. Ratcheting up debt levels to unsustainable levels may well increase the profitability of residential development but surely the dangers of going down that road should be obvious?
I remember when the Central Bank restrictions were published that I was not at all convinced by the level of research done to backup the 3.5 limit. I didn't get the feeling that they had really considered say 3 versus 3.5 versus 4; or for example, whether 3.5 might make sense at a certain level of income but not for all levels.
In my opinion this was awful logic. They'd be better off researching why it's so expensive to build in Ireland relative to the UK & Northern Ireland.
I'd rather a cheaper house than a bigger mortgage.
I listened to an ESRI spokesperson on the matt cooper podcast yesterday.
In my submission, I think I suggested that they should be integrated. For example, with very low LTV, the LTI could be higher, and with a very low LTI, the LTV could be higher... They did actual research and here is a chart from it showing default rates for first time buyers... It's a bit hard to make out, but there seems to be significant enough defaults for LTIs over 3.83 and LTVs over 90. The lenders can make exceptions. And the lenders do measure the Net Disposable Income as well.
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