And this folks is why a banking crisis will always repeat itself. The answer is to lend more and more so people can buy more and more so developers can build more and more.........Now if only we had tried this before to see how it turned out....
Central Bank: LTI to increase to 4 times income for FTBs, LTV to increase to 90% for movers
- Thread starter Sunny
- Start date
And this folks is why a banking crisis will always repeat itself. The answer is to lend more and more so people can buy more and more so developers can build more and more.........Now if only we had tried this before to see how it turned out....
NoRegretsCoyote
Registered User
- Messages
- 5,766
Yep - our great leaders in their infinite wisdom and while sitting in their own houses they bought in Blackrock/Foxrock in the 1970's decided that all new build homes must reach outstanding levels of insulation & air tightness. For the people! What they forgot of course is not having any home at all has very poor levels of insulation and air tightness which is what this aspirational nonsense has done to the supply of new homes.
Free markets are about giving choice to consumers - too choose a BER A2 home or a B3 one.....people will decide what works for them and will express their preference in that most democratic of fashions.....with their wallet. Setting standards artificially high orphans the ability of folks in the lower third of the income distribution to access ANY product at all....which is discriminatory and elitist. I'm not advocating for no standards of course....but rather an acknowledgment that perfect is the enemy of the good.
Re: too few builders - totally agree, our system the last 20 years has fetishized 3rd level academic education over everything else.....a generation of people were signalled that somehow vocational trades were 'lesser than' going to work in an office doing X,Y,Z
Mark Coan
Registered User
- Messages
- 54
While I fully understand the temptation to take a shot at the banks (who wouldn't be tempted), I'm not sure you are comparing apples with apples here.
The lending rules now are chalk and cheese with those in place back in 2008 (I.E. there were pretty much non in place in practice and it was the wild west for brokers and lenders). In addition to the 4X cap that the CBI is keeping in place, the due diligence, stress tests and even the capital buffer requirements all have tightened credit supply hugely and remain.
The CBI loosening the reigns a little on one or two rules amongst many probably does not signal a return to the bad old days, that would risk over simplifying.
My view is that higher prices, as more people will be able to afford homes, will also result in more homes being built as more marginal developments will be green lighted. This will mean more people will get out of the rental trap, with no significant additional risks, which I see as a positive.
There is a big risk that we confuse high house prices with low house affordability, they are not the same thing and this seems point seems lost on many, even our policy makers.
Brendan Burgess
Founder
- Messages
- 53,760
I am in good company opposing this increase in the LTI.
www.irishtimes.com
Sinn Féin finance spokesman Pearse Doherty demanded to know what caused the Central Bank to change a macro -prudential policy it had strongly stood over for most of the past decade. “How come its position has changed? How come it can now convince us it is not going to lead to higher indebtedness and lead to higher house prices? The Central Bank has said recently increasing the limits will just be more money chasing the same number of homes leading to higher house prices. There is a real concern.”
Among those who criticised the change was the Dublin South Central TD Patrick Costello, who is a member of the Green Party. He said that he failed to see how the measure would help those seeking to buy their own homes.
...
Richard Boyd-Barrett of People Before Profit said the changes meant that the mistakes of the Celtic Tiger were being repeated and were “gripping another generation of people with crippling debts as interest rates continue to rise”.
Opposition parties claim mortgage rule changes may push up house prices
Sinn Féin says move may increase indebtedness in Irish society
Sinn Féin finance spokesman Pearse Doherty demanded to know what caused the Central Bank to change a macro -prudential policy it had strongly stood over for most of the past decade. “How come its position has changed? How come it can now convince us it is not going to lead to higher indebtedness and lead to higher house prices? The Central Bank has said recently increasing the limits will just be more money chasing the same number of homes leading to higher house prices. There is a real concern.”
Among those who criticised the change was the Dublin South Central TD Patrick Costello, who is a member of the Green Party. He said that he failed to see how the measure would help those seeking to buy their own homes.
...
Richard Boyd-Barrett of People Before Profit said the changes meant that the mistakes of the Celtic Tiger were being repeated and were “gripping another generation of people with crippling debts as interest rates continue to rise”.
I wonder how often lenders will actually give more than 3.5x income to FTBs even though they will soon be allowed to.
We won't know for sure for 12 months when the Central Bank publishes its mortgage data for the first six months of 2023:
Good Central Bank data on LTVs and LTIs of new mortgages
https://www.centralbank.ie/financial-system/financial-stability/macro-prudential-policy/mortgage-measures/new-mortgage-lending-data-and-commentary Published every six months. For example:
www.askaboutmoney.com
Brendan Burgess
Founder
- Messages
- 53,760
That is a very good point.
A lender would be crazy to give a mortgage of €400k to a couple in their late 20s earning €50k each. That very often drops down to just one person earning €50k and then a prioritising of other expenditure.
But having said a lender would be crazy, that probably means they all will do it.
Brendan
If the Shinners were in power and the shoe was on the other foot I'm sure FFG would be shouting financial prudence from the rooftops.I am in good company opposing this increase in the LTI.
Opposition parties claim mortgage rule changes may push up house prices
Sinn Féin says move may increase indebtedness in Irish society
Sinn Féin finance spokesman Pearse Doherty demanded to know what caused the Central Bank to change a macro -prudential policy it had strongly stood over for most of the past decade. “How come its position has changed? How come it can now convince us it is not going to lead to higher indebtedness and lead to higher house prices? The Central Bank has said recently increasing the limits will just be more money chasing the same number of homes leading to higher house prices. There is a real concern.”
Among those who criticised the change was the Dublin South Central TD Patrick Costello, who is a member of the Green Party. He said that he failed to see how the measure would help those seeking to buy their own homes.
...
Richard Boyd-Barrett of People Before Profit said the changes meant that the mistakes of the Celtic Tiger were being repeated and were “gripping another generation of people with crippling debts as interest rates continue to rise”.
In any case the source of the comment should be ignored and it should be considered on it's merits. PD raises valid points.
I agree the cost of regulations is very high but at the same time the regulators aren't regulating properly , no building inspectors to inspect buildings as they are under construction that probably would have eliminated alot of the building scandals . Pyrite and mica came from illegal quarries that weren't shut down immediately , even when these quarries were reported by neighbours it took years to get them closed down, no concrete testing of blocks by the authorities. If the regulators did their job properly then it would be money well spent.
What is the state's problem with building inspection, they just don't want to do it
The problem isn't the low price of labour, it's the inflated price of capital.
Due dilligence, stress tests, capital requirements were all in place before 2008 as well where we were told there is no issue at all. It is all secured lending. Look at the low loan to value ratios we were told. A 100% mortgage had a 90% LTV within 6 months. Look at the cheap funding. Look at the low arrears. Look at the strength of the balance sheet. Heard it all before.
Property bubbles are not once off historical events in any Country. They always reoccur just like equity bubbles or bubbles in any other risk asset. And every single time, the risk will be downplayed because this time is different. Look at what we have in place now. It has taken us about 12 years to go from the lowest prices of the property crash to now seeing prices higher than at the peak of the housing bubble. I can't think of one other example in a developed world where this has happened previously at this pace. We have had a decade of low or even negative interest rates which is about to change with a bang.
The idea that more people will be able to afford homes at higher prices so more will be built is a developers argument. 'We need to charge higher prices to encourage us to build'. Has anyone looked at the new builds getting built now? Semi D houses are now becoming less and less common. Terraced houses now dominate in developments. House size is smaller. Garden space is getting smaller and smaller. You are lucky to get a drive. And the price in the the surburbs of Dublin without quality transport links? €450k to €500k. And these are starter homes which first time buyers are buying thanks to Help To buy scheme, FTB, scheme and now the loosening of lending limits. Or else bought by investment funds for the rental market. And these funds will leave as quickly as they came if rents reach normal levels. It is simply not sustainable.
And then we will see vast amounts of money chase limited supply in the second hand market. Including County Councils and Housing Associations competing with households to buy stock. And that doesn't even include pension funds and other investors. In my estate where I am renting, a 3 bed semi D that was was built and sold in 2018 for €300k sold three months ago for €510k. The banks are sending out 'Experts' to do valuations and all they do is look at the local housing market and say yeah it looks fine. A 70% increase in 4 years and banks are saying the valuations are fine. In the past three months, four houses have gone up for sale in the same estate at similar levels. None of them have sold or even have offers close to the asking price.
We are now going to see rising interest rates, high inflation and falling prices. However it now looks like the Central Bank have stepped in to provide a boost to the market. They even accept that this will lead to an increase in house prices which are already too high. It's just odd.
I am not convinced that the Central Bank isn't more concerned about the potential for a major correction than they are letting on. What they have done won't have a major impact on prices but it will offer some support at current levels.
Last edited: