Banks not granting LTV exemptions

ireland

#1

I originally posted this on Boards.ie and was wondering what’s your take on this:

“20 per cent of mortgages drawn down in 2018 breached the loan-to-income or the loan-to-value ceilings set by the regulator, close to the maximum permitted.” Source: irishtimes.com/business/financial-services/fifth-of-all-mortgages-in-2018-availed-of-rule-exemptions-study-finds-1.3968337

Does anyone have the figure for 2019?

With people in the “Saving/Applying for a mortgage 2020 Edition” thread saying that their exemptions got cancelled overnight, if this is an actual trend, how is this not going to impact the (new) housing market?

Here is my reasoning:

Before COVID:

Income of 80k x 3.5 = 280,000 maximum borrowing capacity. This fake couple (or a single person with a high income) gets a 3.9 exemption (nothing unrealistic pre-COVID). They now can borrow up to 312,000. With a deposit of 71.5k, they can buy a house worth 383,500.

Let’s say they want to buy a new build worth 400k. They can get the HTB grant and get an extra 20k towards their deposit. Happy days, they “only” have to borrow 308,500. Their loan to value ratio is 76.82%, so well above the minimum 70% required to qualify for the HTB scheme.

Today (exemptions are gone):

Income of 80k x 3.5 = 280,00 maximum borrowing capacity. With a deposit of 71.5k, they can buy a house worth a maximum of 351,500.
With the HTB scheme, they can get another 18k so a total of 370k for a new home. Their loan to value ratio is now 74.46%.

That’s a difference of 30k.

My couple says f*ck it, let’s save more and ask the family for few grands (after all we keep hearing that people saved so much money during the lock down…). They get another 30k for their deposit so a total of 101.5k. They are happy as larry, thinking they are good to go for their dreamed property worth 400k. Yet, their loan to value ratio is now 63.55%, they don’t qualify to the HTP grant anymore. 20k gone.

Even with 30k more toward their deposit, they will only be able to get a place worth a maximum of ±380k. Still a difference of 20k pre-COVID.

Someone added that according to the Central Bank:

“In 2019, about 1 in 8 new mortgage loans, accounting for 17 per cent of the value of new mortgage lending, received an allowance of some sort.”

Thoughts?


#2

I would suggest waiting, propping up property prices appears to be very low on the new incoming governments list of priorities, plus the fallout from the COVID induced economic coma, prices are likely to fall.
Wait a few more months and get more house for your money.


#3

This is insightful - and underlines my belief that prices will fall at least 10% - supply of credit is the primary driver of house prices. You start to tighten it and prices fall…

Is Boards worth joining for property gossip? I’ve never used it…,


#4

I use it but a lot of vested interests ,landlords etc
Auctioneera ie had a profile on it and gave the usual housing market is booming and prices wont drop spiel
They got booted off fairly quickly
Its not a bad forum once you get used to the vested interests


#5

I beg to differ, FF inserted a referendum on a constitutional right to housing in the PfG…


#6

Property prices are certainly driven by availability of credit, but so is property supply. As we saw post-GFC, property prices plummeted for several years but the number of property transactions was dismal, leading to something of a crisis in supply. A credit led decline in prices will benefit a happy few who aren’t constrained by credit. But the majority will be no better off. We need cheaper housing driven by something other than squeezing large numbers out of the market.


#7

A considerable proportion in the cost of a house goes towards land, levies and fees.
That’s not to mention the cost of construction materials.
(…and then there’s the situation regarding the cement “market” in Ireland. Best not to mention that. )

With freely available credit, all these things go up and up, until they reach the limits of the system;
& we all know what happens then.


#8

I completely agree, I find it tiring to read to be honest.


#9

As a matter of interest, why would you say that the new Govt are likely to have no interest in propping up house prices?


#10

Post COVID recovery for one and the green agendas leave little spare cash for propping up house prices.


#11

Lets hope youre right


#12

Building site on my road was abandoned (roofed and weathersealed mind) this week as the bank has utterly balked at making any more stage payments for the house. I was told by a neighbour it could well be next year before work resumes on this site.

Given where it is I would estimate the shell and core job is worth €140-150k or so…even in a firesale.


#13

Where’s that?


#14

I think @2Pack is a tribesman afair


#15

Different problem to Dublin but the same problem essentially. Banks have no faith in income statements and P60s from 2019 because everything has changed utterly since.

Unless you have 2 HSE incomes in one household or something like that. :frowning:


#16

Over the last number of years there were a large number of crash era developments that had been completed in that neck of the woods. There was a big development in Roscam, then there were quite a few others on the west side of the city.
Galway will probably rebound quickly I would imagine.


#17

Like I said earlier

The changes to policy are outlined in a credit policy update distributed to EBS lending managers on June 17th.

It outlines that “currently the bank’s position on customers who are in receipt of any element of the Employer Temporary Wage Subsidy Scheme [ETWS]or the Pandemic Unemployment benefit is to pause these applications until such time as the impacted customer is no longer in receipt of the payment”. The circular notes that there are “strictly no exceptions to this position”.


#18

Please do mention it. Is it cartel territory?


#19

Cuidado señor