The Central Bank of Ireland has issued a paper looking at “The interrelationship between house prices and mortgage credit” which it states “has been one of the more compelling issues to warrant attention after the recent financial crisis.”
They only mention the introduction of 100% mortgages in 2005 in a table of contributing factors. That glosses over it a bit.
It’d be nice to know did 100% mortgages come about from political pressure on the central bank. Or central bankers giving in to the banks, or did the central bank think it a good idea by themselves.
The banks got the green light on these mortgages in July 2005, this would have been a month after another Economist magazine report on overpriced Irish property. First Active went 100% on 14 July 2005, PTSB 22 July 2005, BOI 29 July 2005.
Going by the numbers below it’s possible that up to 80% of the cost of the bank bailout refers to loans issued after the banks were allowed to further relax lending.
I think 100% mortgages were offered by KBC prior to 2005. In 2004 about 5~7% of mortgages were 100% depending on the borrower. I don’t think it was CB pushing this, rather the banks looking to ramp up lending.
The big lift of 100% was in the FTB who were borrowing generally over 80% anyway by 2004. Others were largely stable over the period.
The growth in 100% is set out in the Dept Envir housing stats