Central Bank Consultation - Policy for mortgage lending


#1049

I had someone telling me in the last day that they could swing a mortgage at 5 times their salary and they’d get a loan from family members for the deposit.

I believe the loan book of banks is as fundamentally unsound as it was back in 2008 except lesser exposure to developers and the poor loans(which are currently being serviced) are now mostly home loans which are presented as prime loans when they are anything but.
I believe the issue of property prices and banks being of systemic importance has not being addressed and with a drop in property prices and hiccup in the world economy we’d see Irish bond rates spiking again.
The only reason that Ireland isn’t completely sunk is because the global economy(thanks to blood transfusions at the expense of the donors) was fairly strong since 2010.
I don’t think current government can take credit for this beyond not being as completely incompetent and corrupt as those who proceeded them.

Can financial problems in AIB or BOI drag down Ireland again; I think they can.
Are AIB and BOI digging themselves further in to a financially preacarious situation of their own making; I think they are.


#1050

If they do struggle in an external shock situation, would there be a bail-in from our deposits “in the national interest”: I think there might be.

If the financial system freezes up again, depositors might be the only source of funding left?


#1051

They’ll go after the private pensions first. They got away with that last time and if they raid deposits then how do they raid deposits without raiding their own bank accounts unless they transfer their deposits out one night thanks to insider information before midnight and dong the smash and grab after midnight.
Politicians generally have public pensions, not private pension funds. Deciding to raid bank accounts is like turkeys voting for xmas(except for Bertie who didn’t even have a bank account). Deciding to raid pension funds isn’t.


#1052

I’m not sure that’s going to be the case next time round (if there is a next time), as there are now quite clearly-defined Eurozone rules now about how bank recapitalisations work.

That’s not to say that a future fiscal problems might change things like tax treatment of pensions (as they have done in the UK), but the probability of fiscal problems is lower under a system which includes depositor bail-ins since the State is less likely to be bailing out the banks.


#1053

That’s exactly what happened in Cyprus where the insiders got their money out (to Greece mostly) just before the shit hit the fan. No reason to think the exact same wouldn’t happen in Ireland. And the bail ins are legally mandated now aren’t they?

EDIT: Deposit holders are still way down the ladder and supposedly still protected up to the €100k guarantee.
blogs.reuters.com/hugo-dixon/201 … -bail-ins/


#1054

Yes. The directive is now in place I believe.

ec.europa.eu/finance/general-pol … ion_en.pdf


#1055

To confirm my post yesterday on the Banks no longer stress testing mortgage applications for Interest rate rises.

I contacted my bank 3 days ago to renew my mortgage approval. I first got it done in late 2014 to beat the CB rules. All went ok, got approved for X.
That expired last Summer.
Spoke to the Bank in Oct about renewing the application and was told that the CB rules had changed everything. I would now be required to sell my existing house as I would have too much mortgage debt when all was combined (I had planned to keep it a few years and rent it out). So I didn’t bother with the renewal as there were no houses catching my attention at the time.

So started the process again this week of refreshing the application. Sent off all the paperwork…not much had changed in our circumstances…except an extra Baby had arrived!
Report comes back this morning that I have been approved to borrow X + 30% and can keep the existing house as a rental !!!

Un-fooking believable. :open_mouth:


#1056

Could the central bank hire a few “secret shoppers” to check that banks and mortgage brokers are abiding by regulations or do they care?

As I said, someone was telling me yesterday they had approval for 5 x single family income in a profession which I don’t consider to be particularly secure with a deposit considerably below 20%.
Regulation is needed. Banks won’t regulate themselves and customers are completely irrational.

Where are the banks getting this money that they are lending out and why are they in such a hurry to lend it out at only 3.5 or 4% mortage rate? are they bundling them up and selling them on to greater fools as some sort of magic triple AAA finance instrument?


#1057

I have to say I find these reports odd, or maybe it’s the bank I was dealing with.

I went for mortgage approval with AIB last summer and they were quite picky about the 3.5x LTI and I’m in a secure job (private sector though), high income, no dependants or other loans, great credit history, decent deposit, and I consistently earn a lot more than my base salary in bonus, equity and overtime. They took a tiny fraction of that into account, I think they increased the approval amount to 3.5x base + around 12k.

I also tried to engage with KBC and BoI without a lot of interest on their part, never made it to approval hurdle. KBC did not ring me back, BoI did but once and not at a good time and they didn’t leave me a way to get back in touch with them or follow up later.


#1058

But from what I’m hearing, things have changed since around November 15.
You should try and renew your application and see what comes back, if it has expired?


#1059

I think you need to be careful though - this is only approval.

I’m pretty sure when you pick a house and go for a letter of offer you’ll find the actual amount they’ll lend you will be lower.

This was the case with BOI & AIB for us.

BOI quote made approval amounts, AIB much closer to letter of offer.

I think I’d want to see/hear of someone actually drawing down the higher amounts.


#1060

True but I am fairly certain that I could draw down the full amount. I don’t intend to however all going well


#1061

Nah, bought a gaff (and didn’t stretch to do it). Decided with all the uncertainty to go for something that I’d be happy in long term if necessary but that I might upgrade from in five years if conditions suit. It’s essentially a hedge against Dublin rents and the weird fluctuations in the market, as well as a place I can paint walls and put up shelves.


#1062

I haven’t heard that myself but I am not privy to the full details of the practices of all institutions. I was quite sure that previous Central Bank rules stated all mortgages under a 5 year term HAVE to be stressed at +2%.


#1063

“Over” a 5 year term?


#1064

Sorry, brainfart typing. Variable rates and fixed rate terms lower than 5 years.


#1065

But how many mortgages issued would be for under 5 years?


#1066

Nearly no one goes for long term fixed rates so for all intents and purposes most applicants would be stressed at +2% minimum.


#1067

Ok, get you now

Well, I always value your input as I consider you to be on the ‘inside’ even if you have said earlier your not close to this particular area at the moment. But what your saying is very much the opposite to what I heard and experienced this week

Keep your ears open around the place and see if you can get any info in the coming weeks


#1068

I’ve done a quick bit of googling and I can see secondary references to 2% stress testing (including a submission from the Irish Brokers regarding the introduction of the CBI lending guidelines back in late 2014) but I can’t find a specific CBI document listing such a rule but that could just be my research skills!