My thought is that the next step for Ireland will be a tightening of lending criteria so it'll get harder to get a loan.
This is already happening - not so much that it's harder to get a loan, but that the loan amounts being approved are reducing. This is because as the interest rates are rising, stress test of current rate plus about 2% is obviously eating further into disposable income. I'm aware of a couple of people going for new loan approvals where they've been approved for smaller amounts than initially (think it may have been mentioned on AAM as well, but don't recall for sure), on the basis that while other variables hadn't changed significantly, the stress test was yielding worse results.
I also remember that when, last May or June, I was reducing the term of my then mortgage and overpaying significantly [largely to stress test ourselves for our new and bigger mortgage!], the person I was dealing with in the lending institution was surprised at what we were doing. He said that we were doing the exact opposite to most people he'd been dealing with recently: that large numbers of people were contacting them seeking to extend the terms of their mortgages, take interest-only periods, etc. That was either two or three (?) interest rate rises ago, and I suspect both that there are more people now finding themselves under pressure, and that some of the institutions must be looking rather nervously at their mortgage portfolios - particularly recent FTBs.
I don't think we have, in either prime or sub-prime lending sectors, the same degree of vulnerability that the US sub-prime sector had because there's much more extensive reliance here on income to service the loan, rather than asset appreciation providing better LTV collateral. But I do suspect that lenders here are probably going into very active management of the higher risk loans... very quietly! Their sources of funding, from securitisations for example, will either get a great deal more expensive or dry up if the financial markets perceive the mortgage market risks to have escalated significantly. [Part of the reason low LTV mortgages are often at better rates is that they're often lower risk as cash flow, and the backing asset is well insulated against market shocks, so they're ideal for securitisation as low-interest very secure bonds].
I'd love to see an assessment of the current mortgage lending sector, showing the loan-to-income trends over the last five years or so; LTV stats for FTBs over the same period; trends in loan duration, including where people are varying the term or remortgaging; and credit rating and tradable values of mortgage-secured bonds. I doubt it's possible to collate a great deal of that data, but it could make some very interesting, and revealing, reading!
