Brendan Burgess
Founder
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These days are gone. There is no longer any local discretions for mortgage approvals. Every application must be accompanied by a template repayment capacity calculation (stressed). In a tight repayment scenario the approver will take the track record into account. However, this would not be acceptable where repayment capacity analysis does not meet the minimum hurdle. I am not aware of the stress rates applicable to all banks, but we would apply a 6% stress to mortgage lending a plus 3% stress on other borrowings.Maybe if I had a mortgage for 10 years and never missed a payment, my mortgage lender probably is happy to give me a new mortgage without checking me in too much detail.
I note that a number of submissions are suggesting that a transitional period should be introduced or that the requirements be introduced on a phased basis. However, this would surely only exacerbate the current problem as potential purchasers sought to front-run the implementation of the new requirements thus causing a further spike in prices and increasing the risk of another crash.
The limits should be phased in
Any change such as this will require a lot of adjustment. The initial limit should be 90% LTV with a gradual reduction by 1% every 6 months to reach 80% after 5 years.
This phasing in would allow the Central Bank to monitor the impact of the limits for unforeseen consequences and allow them to tweak the policy.
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