What happens if there is an economic slowdown?

[Glenbhoy]

Is there any evidence that lender criteria are less strict than they were?

In terms of income multiples they certainly have relaxed the rules to a startling degree in the past 8/9 years - particularly so in the past 3/4. I worked in one of the major banks 3 years ago, part of my remit was to consider mortgages approved and ensure that they complied with 'supposed' central bank criteria, as it turned out, the central bank did not enforce any of their recommendations at that stage, before I left that job, the first 100% mortgages were on the market (only to a select group of professionals), this went against all recommendations at the time - central bank response - none that I ever heard of.
In terms of affordability, I don't know how that has changed over the years, I've heard rumours that this is better than in the past, but can't comment either way.

 

[joe sod]

I think alot of mistakes were made over 10 years ago. I think Ireland attracted way too many multinationals for the size of the country. To much money came into the country too quickly. My own opinion is that 12.5% corporation tax was way too low. I think 18 to 20% should have been the rate. This would still have attracted enough multinationals to boost the economy. Maybe the very low corporation tax should only have been given to small indiginous companies operating in high technology or out of universities. the great tragedy now is that when the multinationals do move on, they will have left behind little indiginous capacity.

 

[CCOVICH]

In terms of income multiples they certainly have relaxed the rules to a startling degree in the past 8/9 years - particularly so in the past 3/4. I worked in one of the major banks 3 years ago, part of my remit was to consider mortgages approved and ensure that they complied with 'supposed' central bank criteria, as it turned out, the central bank did not enforce any of their recommendations at that stage, before I left that job, the first 100% mortgages were on the market (only to a select group of professionals), this went against all recommendations at the time - central bank response - none that I ever heard of.
In terms of affordability, I don't know how that has changed over the years, I've heard rumours that this is better than in the past, but can't comment either way.

Yes, that was really what I was getting at I guess-income multiples may have been relaxed to a degree, but that doesn't necessarily mean that borrowers are finding mortgage repayments as burdensome as they did in the past (but does that make sense, i.e. if multiples are higher, surely the burden is higher?). Although that could be due to longer terms and interest rates nowhere near the mid-teens....

So are we likely to see rates as high as they were in the early/mid eighties? If they remain low by historic standards, then any slowdown will arguably look (slightly) different this time around?

And getting back to the Central Bank/Financial Regulator-it appears that they never actively ensured their lending criteria were enforced-fair enough, we are all adults and should be responsible for our own decisions, but that is to be balanced against the need for stability in the banking system. But is such central bank 'interference' exhibited in other (free market) economies? Have lenders been fined/disciplined for breaching centrally determined lending criteria?

 

[TallSpoon]

Ccovich, I remember a year or so ago there was a documentary on BBC about mortgage fraud in the UK. It showed that the practice of exaggetaring ones income was widespread and done with the full knowledge of estate agents. The programme told how mortgage fraud was fuelling the market and making life very difficult for workers such as teachers and nurses to get a property.
I think that if it happens there then it happens here.

 

[CCOVICH]

Ccovich, I remember a year or so ago there was a documentary on BBC about mortgage fraud in the UK. It showed that the practice of exaggetaring ones income was widespread and done with the full knowledge of estate agents. The programme told how mortgage fraud was fuelling the market and making life very difficult for workers such as teachers and nurses to get a property.
I think that if it happens there then it happens here.

Maybe, but banks require payslips etc. when you apply for a mortgage, and so this would prove income. Granted, it is possible to get a letter from your employer to say that you earn XXX, or will be earning XXX by the time you have to make mortgage repayments.

And what do estate agents have to do with it-they don't deal with banks? Are you referring to brokers? I'm sure estate agents don't give a damn how you get approval as long as you have it, and frankly I can't see why they should.

 

[Glenbhoy]

Granted, it is possible to get a letter from your employer to say that you earn XXX, or will be earning XXX by the time you have to make mortgage repayments

I suspect it happens frequently, i have definitely heard plenty of anecdotal evidence of it - in addition, I imagine many people who say they'll rent a room out do no such thing, and that can get you quite a few thousand more.
In reply to your earlier post, yeah, the lengthening mortgage terms are a massive factor in affordability, these have practically doubled from 20yrs to 35 years. I can't verify that 20yrs was the normal length of a mortgage, 15 years ago, but in my experience (admittedly a very small sample) mortgages have been for 20yrs. 35 years mortgages would however have been the majority of FTB mortgages released by that bank 3 years ago.