What about people stuck in apartments who can't trade up?

Brendan Burgess

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If John wants to trade up to a house costing €300k, he can do so because he is exempt from the Central Bank's LTV restrictions. He is still covered by the LTI restrictions.

Although Mary is in a better position than John, she can't trade up because she will need €60k.

In general, I support the 80% rule for second time buyers.


Should the rule be changed to something like the following:

The maximum LTV for second and subsequent buyers should be 80%.

Here is the normal situation envisaged by this rule:

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And that seems like an eminently sensible rule.

The Negative Equity exemption can stay in place.

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By requiring a deposit of 10% of the purchase price, the absolute negative equity is reduced as is the Loan to Value.

However, mortgages up to 90% should be allowed so long as the borrower is increasing their equity. For example:

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Is bank lending not 3.5 times salary regardless of whether your exempt from the central bank rules? so for a €300k house an income of €85k is required?? For your example of €400,000 an income of €114k would be required?
 
Correct.

I am setting out the LTV issues in this thread. The borrower could be limited further by LTI or by a bad credit record.

Brendan
 
I will add the following to my submission to the Central Bank.

"Over-payments made by borrowers should be added back, when calculating the current equity and the deposit requirements"

Consider the following position:

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If this borrower does the correct thing and pays down their mortgage, they will be unable to trade up. If they hold onto their savings, they will be able to trade up.

The Central Bank rules should never be framed in such a way as to disincentivise sensible behaviour.

This anomaly can be easily fixed by adding back overpayments for the purposes of all these rules.

The borrower who overpays their mortgage should be treated as being in negative equity with a €50k deposit.

Brendan
 
Thank you Brendan, the anomoly regarding overpaying the mortgage to reduce the neg equity is a position I found myself in. I overpaid about €50,000 in lumpsums in the last few years to reduce our negative equity. We now find that we have equity but have a much smaller deposit to put towards the 20% needed under the CB rules.
 
Hi Leaky

It's terribly important that you, and others affected by this, make a submission to the CB on this issue.

They regard people like me with suspicion. They consider us to be theoretical. Which is bizarre, because we are rooted in what is actually happening.



Brendan
 
Is there a particular way to make a submission to the CB regarding this issue or is it the case that you write directly to the Governer ? It is my intention to make a submission (if I still can) however I'm not sure where to send it to.
 
Has anyone made a submission on this point?

I will make it but it would be far more persuasive if it were to come from a borrower who has been directly affected.

The closing date is tomorrow week, 31 August.

Brendan
 
Is there a particular way to make a submission to the CB regarding this issue or is it the case that you write directly to the Governer ? It is my intention to make a submission (if I still can) however I'm not sure where to send it to.

Hi Annie

I missed this when it first appeared.

If you would like to make a submission, please:

  • fill out this [broken link removed][broken link removed]
  • send it to [email protected] along with any supporting documents by 31 August 2016.
 
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