Confusion in the media around the Central Bank rules

Can someone help me out with the correct calculation please?

So far, Gekko says €143K
Brendan says €148k
ppmeath says €171k
 
elacsaplau said:
Can someone help me out with the correct calculation please?

So far, Gekko says €143K
Brendan says €148k
ppmeath says €171k
Click to expand...

Which goes to show two things.

1) It's a very high salary whichever of us is right.
2) It's easy to get it wrong.

I think I am correct, but it's complicated.

Brendan
 
elacsaplau said:
Can someone help me out with the correct calculation please?

So far, Gekko says €143K
Brendan says €148k
ppmeath says €171k
Click to expand...

"To qualify for a mortgage on a €600,000 home, the borrower would need, under the Central Bank rules, an income of €171,000 per annum.Even for a joint income, this is at the upper limit of the Irish income distribution. For a single income, this is a grant to the very highest earners in the country."


3.5 x 171k is 600k, I thought the point he was making was that without any intervention, this is the income required to qualify for that mortgage, according to the article:

"The Central Bank, according to Michael Noonan on Budget day, has accepted that the grant money will be allowed when calculating the deposit required of purchasers under its mortgage lending rules."


So when taken into account with the 2% (which would also be taken into account) - the income required when these are taken into account circumvented the rules and allowed a person/couple on a lower income to buy the 600k home.

I don't think the calculations are wrong, because to my mind, that is not what he was saying.
 
elacsaplau said:
Thanks Brendan,

Can you explain your calculation please?
Click to expand...

Here is the full quote from the article


It's loosely worded.

You could qualify for a mortgage on a €600,000 home, with a salary of €30,000, as long as you had a €500k deposit.

But to qualify for the €20,000 income tax rebate, you would need to borrow 80% of €600k or €480k.
A mortgage of €480k is 3.5 times a salary of €137k

Of course, you could have a salary of €300k and still get the grant, as long as you borrow €480k.

Brendan
 
Brendan Burgess said:
Which goes to show two things.

1) It's a very high salary whichever of us is right.
2) It's easy to get it wrong.

I think I am correct, but it's complicated.

Brendan
Click to expand...

Is €71.5k a year "a very high salary"?

I fear that it's this type of narrative that's facilitating the lurch to the left as evidenced by the €70k plus USC rates and the lack of tax cuts for people on €70k plus (the ones who keep this country going and who were hit hardest during the crisis).
 
€220k @ 10% = €22k
€380k @ 20% = €76k

Total deposit = €98k

Mortgage = €502k

€502k / 3.5 = €143k
 
Hi Gordon

This is what is confusing.

They are very likely to get a 90% mortgage exception on those salaries.

Brendan
 
"To qualify for a mortgage on a €600,000 home, the borrower would need, under the Central Bank rules, an income of €171,000 per annum."

So we can all agree this statement is wrong or at least very misleading?
 
elacsaplau said:
"To qualify for a mortgage on a €600,000 home, the borrower would need, under the Central Bank rules, an income of €171,000 per annum."

So we can all agree this statement is wrong or at least very misleading?
Click to expand...

Yes, it's wrong. The number is €143k.
 
Gordon Gekko said:
Yes, it's wrong. The number is €143k.
Click to expand...

Hi Gordon,

I think your calculation is the most reasonable - all others need serious qualifications, etc.

Personally, I think that the measure under review is silly - so I don't get why Mr. McCarthy needs to introduce false figures to make his point. I know I'm on the asperger scale but I find it a little hard not to discount an article in its totality when verifiable facts are plain wrong - even, as here, when I agree with the substantive point.

I know some will say "oh but it's complicated".......I don't, at all, buy this argument (Read: the author has difficulty working out the standard deposit, deducting this from the purchase cost, dividing the residual by 3.5.............yet, at the same time, is somehow able to meaningfully comment on the socio-economic impact of the measure) or that it's a typo (again, not tenable as I understand he repeated the falsehood on TV last night. Also, invariably the "typo" is in favour of the author's agenda............can't ever imagine the offending sentence would understate, rather than overstate, the income requirement by €28k, as in......
"To qualify for a mortgage on a €600,000 home, the borrower would need, under the Central Bank rules, an income of €115,000 per annum."?!
 
His statement was that people on very high salaries do not need this €20k.

He calculated the salary required at €171k

I calculated it at €143k

The principle is correct - someone earning €143k is on a very high salary and does not need €20k from the government to buy a €600k house.

Brendan
 
Brendan Burgess said:
I calculated it at €143k
Click to expand...

I think that is incorrect - it was Gordon who calculated the required income as €143k in his initial post. However, I agree that this is by far the most appropriate figure to use.

I think Gordon made his point clear as have I - McCarthy has simply increased the true figure by 20% - presumably, because he thought it would suit his argument better. This is very shoddy journalism & economics - because he simply can't be that bad at maths!!
 
Last edited:
You must log in or register to reply here.
Menu
Log in
Register