Central Bank Consultation - Policy for mortgage lending


#1069

No need to stress test if mortgage limited to 3.5 x income.

Prudent lending makes complex stress and scenario testing (SST) irrelevant :slight_smile:

However rule exceptions should be subjected to full SST.


#1070

Do you mean, that’s what you think should happen, or that’s the the CBI mandates banks to do?


#1071

I have very limited knowledge of the exact CBoI requirements in relation to prudential bank lending but I would be very surprised if

  1. all mortgages limited to 3.5 x income would not pass a 2% stress test.
  2. banks would not be able to justify the reason and future repayment capacity of those who fall outside normal lending criteria

#1072

I’ve asked before but not as directly as I’m asking now.
What are AIB and BOI doing with all these mortgages? Are they keeping them on their books or are they packaging them up as AAA financial instruments and selling them on.
I’ve questioned the quality of the assets on which mortgages are being given recently?

The only people who could be prepared to provide these loans are people who are insulated from the risks associated with non-payment of these loans.
Are they being underwritten by the market or underwritten by a guarantee from Government to cover a portion of their losses if the loans go bad or do AIB and BOI just see themselves as penny share companies and feel like they’ve got nothing to lose?
I mention only AIB and BOI because I assume they are issuing most of the loans these days.


#1073

Why do you question the quality of the assets on which loans given out by AIB or BoI are secured?

My experience is that banks do not release the mortgages funds unless then have a letter from the purchaser’s solicitor confirming good and marketable title. Oh yes and a letter from the solicitor’s insurance company confirming their PI insurance is up to date.

What’s your experience?


#1074

I’m guessing what dipole means is that the security is worthless on owner-occupier mortgages?


#1075

Not just owner occupier mortgages, there are a higher proportion of BTL in arrears over 90 days than PDH according to the latest set of central bank figures.
10 years later, as Mr Anderson says, this is completely unbelievable.


#1076

You can’t just apply the 3.5 x income on a flat basis. Repayments need to be stressed and limited to a maximum percentage of one’s net income. What if someone was looking for 3.5 times their income over 5 or 10 years? The shorter the term the higher the repayments and you need to restrict within other parameters too.


#1077

I’m not talking about them being worthless on owner-occupied houses although it is a good and valid point. I’m talking about little hovels I’ve been in commanding 400 to 500k valuations and nasty little apartments in the butt crack between sink estates commanding 160k valuations.


#1078

I would guess that those looking to repay a mortgage within a 5 to 10 year time frame would be a small part of the overall market.

So yes there are exceptions


#1079

Yes, there are exceptions, but the point I was making is that you could have a very short term mortgage which is clearly unaffordable but not an exception to CBI rules. You can’t just assume a proposal is fine and not in need of stressing just because it is 3.5 times someone’s income.


#1080

independent.ie/business/pers … 23295.html


#1081

Updated volume chart (with data for Dec 2015) for Mortgages for House Purchase, including FTB, Mover Purchase and RIL.

Average approval values data shows a slight jump to €200,684, ever so slightly eclipsing the previous record of €200,191 from Feb 2015. Probably need to break down the data between FTB, Mover Purchase and RIL to see any clear trend, but it’s very odd that the CB regs haven’t really affected approval values at all.

https://s14.postimg.org/4bie3qj69/Screen_Shot_2016_02_04_at_17_08_58.png


#1082

I heard a story that a mortgage broker was visiting estate agents and boasted that if any aspiring purchaser had an issue with the CB rules to come to them

sounds weird but then again this is Ireland


#1083

Are these in any way popular?

I remember wishing I could avail of their competitive mortgage rates a couple of years ago. The max value including deposit of €220k is quite close to your plateau.

Edit: Here’s the current rate :open_mouth:

environ.ie/en/DevelopmentHou … 898,en.htm


#1084

Hmm. It looks like the number of “Home Choice Loans” issued are ridiculously low so never mind.

kildarestreet.com/wrans/?id=2015-11-19a.671


#1085

I’ve heard some banks are giving brokers their own quota of exceptions based on previous years business to use accordingly so rather than have some higher criteria to meet the exception a broker can say “I want dat one, dat one and dat one”. It’s by no means a cast iron source but the same person told me that a lot of the brokers spunked this up front rather than managing it delicately which caused the exceptions to be used up rapidly leaving most of the banks with none come October/early November. Maybe someone else here could corroborate this?


#1086

irishtimes.com/business/fina … -1.2523738


#1087

Does this mean he’s finding it hard to sell four-beds in Lucan from 675k to 755k?


#1088

:slight_smile: It’s the Notting Hill of West Dublin