Second time buyers should have 20% of the increased value of the house

[Brendan Burgess]

This fairly simple rule would solve a lot of problems

A borrower living in a €200k house who wanted to trade up to a €300k house, would require €60k under the current rules.

I suggest amending this to requiring an additional €20k (20% of the increased value of €100k) of a deposit over the current equity.

 

[Gerard123]

If a second time buyer that means Borrower 1 in your example may be on interest only, as the mortgage and house values are the same? Or is it that house prices have fallen perhaps? If they can't pay a capital element on their existing mortgage I would be against giving them a higher mortgage.

Second time borrowers who have demonstrated an ability to pay their existing payments in full, and have built up some equity - there may be some rationale to lower the 20% on cost of the new house, so your suggestion may work.

 

[Brendan Burgess]

Hi Gerard

Yes, I am using an example of someone who bought a house some years ago and the value has fallen.

I don't think that any lender is doing interest only mortgages for family homes. If they have rescheduled the loan to interest only because of payment difficulties, the Central Bank limits will be irrelevant - the lender won't give them a new mortgage anyway.

Second time borrowers who have demonstrated an ability to pay their existing payments in full, and have built up some equity - there may be some rationale to lower the 20% on cost of the new house, so your suggestion may work.

That's a very interesting way of looking at it. In normal situations they would have built up a fair bit of equity due to capital repayments, but as house prices fell so heavily, many borrowers have little equity.

Brendan

 

[trasneoir]

I appreciate that there's an illogical discrepancy in borrowing power between people with -1% equity and 1% equity, and this would narrow the gap significantly.

However, this measure would significantly weaken the protective value of the affordability criteria. If we weaken the criteria to the point where they don't bother anybody, they will be useless.

I'd see the negative equity and FTB exceptions as politically expedient loopholes, which should be closed gradually as affordability criteria become the "new normal".

 

[Brendan Burgess]

While I agree with you in theory, in practice, there are many people who are trapped in unsuitable homes through buying at the wrong time.

If they have been paying their mortgage for 10 years and the lender is happy to lend them the money, then they should not be condemned to a one bed apartment for another 10 years.

Brendan