Five things you need to know about the new mortgage rules
The Times have a good summary article of the new mortgage rules which goes something like this:
- The rules may not push house prices down – as our agent Ben Thompson discussed last week.
- It will cost you less to buy as you’re putting more equity in – in terms of repayments on a smaller mortgage. Less per month and far less over the lifetime of the loan.
- The new mortgage lending limits are not absolute – Banks have the discretion to ignore the limits up to 15% of their lending for the year.
- The worst hit may be those who bought during the boom – Again! Homeowners trapped in negative equity or with low equity in their property will have to wait to move.
- The bank of mum and dad will be open for business – The increased deposit requirement will increase pressure on parents to help out FTBs with their deposits.
Mortgage approvals up 44% last year as recovery continues
The Times highlights data from the Banking & Payments Federation Ireland which shows 2014 was an excellent year for mortgage lending.
Even in the last three months of the year, when the market was slowing and fearing the worst from the Central Bank, loan approvals were up 57.8% from the same period in 2013.
Damien Kiberd: Central Bank’s mortgage rules are shutting people out of housing market
The Indo’s columnist recalls a radio interview with the Central Bank’s Patrick Honohan where he was asked what effect his new lending rules would have on people afflicted by negative equity. Mr Honohan seemed to suggest it was only a small section of the population.
In fact, best estimates suggest about 350,000 households are currently in negative equity. In fact what he meant to say was these current rules are not meant to affect or cover negative equity households. Instead the Central Bank expects the banks to forge a new deal to allow negative equity homeowners to move.
Hazy suggestions in the banking sector suggest that negative equity holders who want to move home will henceforth crystallise the difference between the value of their existing home and the mortgage debt, add that sum to the price of their new home and stump up 20pc of the resultant sum total as a deposit.
Those who will be particularly hard hit include mortgage holders under 35 years who, according to the latest CSO numbers have median loan to value ratios of 116.8pc.
For new homebuyers it points to a segregated market.
Effectively the €220k ceiling is a direct attack on Dubliners with ordinary jobs and modest housing aspirations.
The biggest net losers as a result of the lending rule changes will be young, urban workers.
Owning a home will become a pipedream for people who choose to stay single and for those who don’t want to form conventional nuclear families.
While children of wealthy parents will be unaffected.