The Central Bank's paper on the property crash

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.”

The paper concludes;

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](https://www.centralbank.ie/publications/Documents/08RT13.pdf)

It would seem they’re pinning the blame on the “affordability” pitch used by lenders.

Blue Horseshoe

I’m not sure they’re pinning the blame, but given the paper’s title, they have identified affordability as a central driver of credit qualification.

I think they are right - every tax cut, every interest rate lowering, ever partnership pay rise = bigger mortgages.

Just like the plan from 2001 was all along…

Am I alone in thinking that this all sorta states … the Bleedin’ Obvious!

Wondered the same. We are paying for this?WTF.

Yes that was my take on it as well.

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.

cormaclucey.blogspot.ie/2013/01/ … t-and.html

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

environ.ie/en/Publications/S … tatistics/

@ Grumpy & Sorehead, it’s interesting to see how the UK is intent on making essentially the same mistake.

“Professional people such as solicitors, accountants, consultants” could get 100% mortgages some years before PAYE earners, so maybe that’s the 5-7%.

I believe the requirement on deposit level was coming from the CB, if I remember correctly the banks didn’t strictly need CB approval, but in practice they did wait until they got the official nod.