Ireland is not denmark when it comes to mortgages

Two blogposts this morning on the bill that Sean Barret from TCD introduced into the Seanad last tuesday/

Stephen Kinsella on Irish economy : irisheconomy.ie/index.php/20 … -mortgages and Brian Lucey :Danish Mortgages in Ireland? No thanks | Brian M. Lucey both outline the proposal and give some background.

In essence the idea seems to be to cap the maximum permitted LTV at 80% , to introduce the danish balance principle where all mortgages are covered by covered bonds and to in essence try to make the banks less exposed to the swings of the mortgage market.

It seems that the Seanad parked the bill, despite everybody approving of it in general.

well at least someone is doing it. At least trying. Whats intriguing is why the minister wasnt so hot on it. Seems the idea of capping mortgages is one that will take some time to percolate

So, despite the trail of destruction, good prudential practice is not going to be a legal requirment?

This stuff need to be sorted before the banks are back on their feet.

Well, it seems that it wont.
finance.gov.ie/viewdoc.asp?DocID=7402

bollixology

Sounds sensible, but since we’re Ireland, even if it is brought in, you know they’d find a way to fcuk it up !

Insurance would be a disaster as it would allow the risks/bubble to be ignored and we would end up bailing out the insurance firm.
Denmark is no role model given their bubble and they are one of the few countries with higher personal debt than us.
Sensible hard levels would be appropriate like 80% LTV for PPR and 50% for BTL.
You also need to prevent the likes of the government offering ‘grants’ for the deposit as is the case in many countries.

But… how would the market ever recover at that rate? :angry:

Seems like a sensible approach but I’d advise it’s introduction be staggered over time - say 3% per annum.

Am unsure about economic arguments for increased %'s for BTLs - although it could lead to levelling the playing-field between purchasers (owner-occupiers who will realise the asset upon sale thereof and restricted-TRS) and landlords who can offset a % of annual interest and maintenance costs against rental income. Am interested to hear what people think re this … …

I know, I know, the poor speculators and EA would be out of pocket with such Draconian measures. 8)

Exactly, see AIG in the States.

Fannie and Freddie are probably better examples.

And yes it would…

Despite all that’s happened it seems there are still lots of powerful people in Ireland who can’t get their heads around the concept that high property prices aren’t necessarily a good thing.

The government should impose sensible LTV percentages and income multiples for mortgages. If a lender wants to exceed these it should be allowed. However, the institution then moves outside the state guarantee system and is required to inform all stakeholders (depositors, bondholders etc.) of this move towards higher risk.

The biggest issue with ideas like the above is the concept of value. what is value? we all know valuers can be bought and sold, so they’re hardly a valid basis on which to predicate the whole housing market.

Make the whole thing income related. P60/p21 only. ignore everything else. Max monthly repayment 30% of net income, inclusive of mortgage protection.

Value is illusory. cash isn’t.

Indeed and nothing beyond the state-covered LTV should be considered as recourse. It should be considered unsecured personal debt.

And the calculation for income multiple should be based on tax-declared income for the previous three years… now where have I heard this before… :slight_smile:

lack of repo is the irish characteristic for mortgages. No stick. Therefore all mortgages should, as someone has said be regarded as unsecured debt from the irish banks pov.