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:
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.”