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....
Yes more renters entering the market will raise prices, but if more people can afford higher prices due to more credit availability then the net result will be more houses being built as developers can make a profit.
Over the course of 2021/22, Central Bank of Ireland conducted a comprehensive review of the overall mortgage measures framework.
The purpose of this overarching review was to ensure the measures remained fit for purpose, in light of changes to our financial system and economy since they were first introduced in 2015.
The Central Bank has set out the conclusion of its review in its framework for the macroprudential mortgage measures.
Key outcomes of the review
The Central Bank’s mortgage measures framework review has re-affirmed the benefits of the mortgage measures. Since 2015, the measures have strengthened the resilience of borrowers, lenders and the economy overall. By guarding against very high levels of indebtedness and unsustainable lending in the housing market, the economy as a whole is in a better position to withstand adverse shocks than in the past, including shocks stemming from interest rate increases or cost of living pressures.
The Central Bank assesses that the economic costs of the measures have increased since 2015, primarily arising due to structural developments that have led to persistently higher house prices relative to household incomes. As a result, the Central Bank reached the judgement that targeted changes were appropriate to re-balance the benefits and costs of the calibration of the measures and to ensure they remain fit for purpose into the future.
Building standards are too high meaning material input is excessive. Also building labour is too high caused by too few builders and too much work.
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.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....
I wonder how often lenders will actually give more than 3.5x income to FTBs even though they will soon be allowed to.There was some merit in the argument that LTI levels were set at a time of high interest rates and that they should be brought down when interest rates fell. But now that interest rates are rising again, it seems wrong allow people borrow 4 times their joint incomes.
wonder how often lenders will actually give more than 3.5x income to FTBs even though they will soon be allowed to.
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 societywww.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”.
I wonder how often lenders will actually give more than 3.5x income to FTBs even though they will soon be allowed to.
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.Building standards are too high meaning material input is excessive. Also building labour is too high caused by too few builders and too much work.
The problem isn't the low price of labour, it's the inflated price of capital.Well we need to pay labour a fair wage so they can afford to buy/rent ... lack of affordable rentals mean immigrant building labour has surely vanished?
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.
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