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FIRST-TIME BUYERS will no longer need to have a deposit of 20% on properties above a certain value.
The rule was scrapped following a review of mortgage measures by the Central Bank.
Regulations have been in place since February 2015, the aim of the rules is to prevent spiralling bank credit fuelling house price rises. However, the Central Bank have made changes following a review of the procedure.
In was announced this afternoon that a first-time buyer will now only need a deposit worth 10% of a property, regardless of its price. However, the 20% deposit rule will continue to apply to second-time and subsequent buyers.
The 3.5 times ceiling on the loan to income (LTI) ratio remains. Requirements for buy to let borrowers and the exemptions for negative equity mortgage borrowers from the measures also remain unchanged.
The are the changes that will be effective from 1 January 2017:
Governor Philip Lane said: “Over the past 18 months, the measures have helped to ensure that those who buy homes are better prepared to manage their mortgage payments in the event of a future downturn in the economy or in the housing market.
“While our review process affirmed the value of the overall framework, some modifications to the measures were suggested by our evidence-based analysis.
The 90% loan to value ratio limit for all first time buyers simplifies the overall framework, with only 5% of lending permitted above this level.
“The 20% allowance for lending above the 80% loan to value ceiling for second and subsequent buyers is broadly in line with current lending patterns. The loan to value requirements for all other buyers will remain in place. Taken together, these measures constitute a sustainable framework to underpin our financial stability objectives.”
Finance Minister Michael Noonan has welcomed the Central Bank’s changes saying that, in tandem with the government’s help to buy scheme, they “will be of great assistance to first-time buyers”.
“These two measures, which reinforce each other, will have a significant impact on the capability of first-time buyers to fund their first family home,” the minister said.
The Professional Insurance Brokers Association (PIBA) is among those who have been critical of the Central Bank’s decision on retaining the 20% deposit rule for second-time buyers. The PIBA has described that decision as “very unjust”.
An initial version of this story was published this morning and was updated since the announcement was made by the Central Bank.
Additional reporting by Cliódhna Russell.
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So wait they’re going to bring more customers to market quicker without increasing stock? I’m an idiot and I even know where this is going! How is this going help but just inflate prices. I can’t face palm enough.
Deborah
I would not say you are an idiot.
Also besides driving house prices it also adds extra risk to the economy as a whole. Lax lending guidelines was a significant contributor to getting us into this mess in the first place
The reason things got in a mess was hugely led by the public who lied and exaggerated on applications. They also put pressure on the banks to lend more. Here we have it again as the public were asking for the 20% rule to be changed. Blaming the banks and absolving the public is just easy for people. This change was due to public pressure.
@Deborah Behan:
This is a measure aimed at increasing stock.
Developers simply won’t develop unless they can be certain there are enough people out there to buy the new homes they build.
If no one is going to but the new homes, all the VAT breaks in the world won’t convince a developer to build.
People on here have been praising Philip Lane for months – he’s no fool and he knows this measure is needed.
@Deborah Behan: It will be a safe landing ……..
The market has failed catastrophically again. It’s time to stop pandering to the private sector which cares only for profit. The government needs to implement a huge program of social and affordable housing construction and take the speculator parasites out of the equation. Rent controls and significant reductions are also required and also a ban on family home evictions.
So banks can lend at 90% regardless of the price. Unbelievable stupidity. Well if the arse false out of it they take the hit. End of!
They may as well drop the pretence and jump to 100% mortgages, clearly that’s where we are heading.
Time to sell and move abroad
Are you waiting on a free house billy?
Can everyone please read Philip Lane’s article on this site about the reasoning behind this change. It clears up a lot of the misconceptions in this comment section and gives real insight into what the Central Bank’s function is.
This change does not appear to add additional risk to Bank’s portfolios and doesn’t change the income to house price ratios, so it’s zero impact on a candidates eligibility for a mortgage – just means that if a couple wanted a house for 400k, they’ve to front up 40k instead of 58k for the deposit.
Billy> Every estate the government ever built has had major social issues that we still are dealing with. They should never be allowed create these again as they will cost much more in the long run both socially and economically
@Ciaran Ó Fallúin: sadly Ciaran I have read his statement and the CBI’s report. I am more worried than ever. Two weeks ago a Subprime Mortgage Lender (Pepper) entered the Irish Mortgage Market. Pepper have been operating here previously as fancy debt collectors and are now going to be offering loans that the likes of Start Mortgages and others did pre crash.
Not only that, but the CBI’s report shows the banks have already been circumventing the LTV rules, confirming that nearly 20% of loans are above the Rules. Worse still, a portion of this 20% were 100%. So go ahead, be placated by Governor Lanes statement. I look at the facts and the facts are worrying.
https://trickstersworld.com/2016/11/07/3947/
@Kal Ipers:
Nonsense Kal. Cabra is just down the road from me and is a perfectly decent place to live. There are hundreds of thousands of families buried up to their necks in extortionate private sector rents that would dearly love to rent an affordable council house there.
Well planned social and affordable housing developments with decent infrastructure like schools, shops , sports facilities, transport links, community centers etc will create vibrant communities and benefit everyone except the rentier parasites
Sure Deborah, that was always the plan!!
@Brinster: brinster, you are wrong. This is designed to drive up prices thus increasing developers profits which will increase supply.
It’s bullshit, the 20% requirement was designed so that the property owner would take a 20% hit if prices fell, now that prices are increasing it’s safe for the Central Bank to reduce this to 10%.
This is not for the public good, this is another means of protecting banks, increasing the wealth of developers and making up tax shortfall with taxation from property, almost 50% of the cost of a house goes straight back to revenue and increasing house prices equals increasing property tax.
Ronan Duffy, how about an article on Jonathan Sugarman for balance into how the Central Bank f**ked and continues to f**k us over?
@Ciaran Morgan:
” the 20% requirement was designed so that the property owner would take a 20% hit if prices fell”
I really, really don’t think you understand what you’re talking about.
The 20% requirement was to do with the buyer, not the owner.
I agree with this somewhat. The banks were to blame, but so were people applying and lying. Even people not lying but thinking they could afford the payments without really thinking of what happens when I lose my job or get ill etc. The 20 percent rule is high but if that’s what it takes to educate our citizens to be responsible and save appropriately well then so be it. Why not making it 15 rather than lowering it back to 10? Baby steps no?
Any chance government and central bank could make it a wee bit easier to pay back a mortgage by reducing the interest rates? One of the highest interest rates in Europe
This government set out to intentionally make sure house prices rose at extortionate rates in the last few years. How else could all these vulture funds makes hundreds of millions off the back off the back of the average Joe. Those traitorous b*stards FG should never see power again but we have such a thick uneducated electorate that they see no problem with, or don’t understand, what this vile group has done to the Irish people.
That’s what we said about FF, who will likely replace them
Keith unfortunately I would put at least 50% of the Irish electorate into the politically clueless category. Some are naive, some just have no interest in politics and others wilfully vote for corrupt politicians. You have the farmers then, who vote blindly for FF/FG no matter what as they always get taken care of (CAP, college grants etc). There really is no hope for this country!
@PaulJ:
Who are you voting for next, PaulJ?
Paul
A big part of the problem is that there is no party which is worthy of a vote
The voter is stuck.
You either vote for ff/fg who epitomise corruption but are at least financially prudent (now).
You vote for Sinn Fein who promise the sun moon and stars to the non working class who would have to increase taxes drastically to pay for all the freebies they’ve been promising everyone thereby hammering the working classes even more.
You vote for people like mick Wallace and Clare Daly who are populists who have no interest being in government as then they would have to make actual decisions. They would be prefer to be supporting criminals in court/offering to pay a terrorists bail
Why not vote for aaa nick. free water free houses. what next free food? free beer?
Rates are high to keep the banks profitable and to balance out defaulters. If they reduce mortgage rates then day to day banking costs will shoot up. The money needs to be made somewhere by the banks.
@Patrick Gough: Vote for Patrick Gough !
Free lectures on who owns swimming pools
It’s gas how Irish people hate the truth. Guess what happens when banks lose profitability? Oh yeah!!!! They fail.
Hold on, they are going to increase the amount that can be borrowed?? Surely this means that little simi detached you are bidding on will now increase in price by around the same amount as the increase in the LTV ratio? Unbelievable Jeff
Surely the issue is supply rather than demand? Could loosening lending restrictions while the amount of housing grows at a very slow rate (still to expensive for developers to build) not help exaggerate the crisis? Even more money going after essentially the same amount of houses?
It’s not expensive to build, it’s the developer trying to pay off the loans for land they bought in the boom. The cost of building is still low
It is very expensive to build in Ireland. This is the main driver why developers (old, new or potential) are not building.
Here is an article by Ronan Lyons from earlier this year outlining the cost.
@Noel Tate:
Reducing how expensive it is to build in Ireland is only one side of it.
We have to ensure that there is a sufficient market for new homes.
The only way to do that is to ensure there are sufficient buyers.
You can reduce cost all you want – if a developer thinks the house won’t sell, he won’ build it in the first place.
michael it’s also the high tax on building.
“The stated aim of the rules were to prevent spiralling bank credit fuelling house price rises”. That went well then!
No. With this easing of the rules, the spiraling is about to begin. Que the next crash in 12 months.
700k for my barrytown terraced house. Bring it on.
The housing crisis is the result of the most deliberate Fine Gael policy to inflate housing costs in order to transfer wealth to their supporters. In any other country these charlatans would be hung for what they’ve done.
You’re giving them way too much credit if you’re suggesting that the current situation is the result of any deliberate policy. The government don’t have the brains or foresight to have that level of control of the situation
Its the result of small successive policies and deliberate inaction by thus government, so yes they are entirely to blame. The government needs to build and they need to start capital projects to do so. Self interest is stopping this. If they do this now they may prevent a pensions crisis in years to come, however as it is people can’t save into pensions due to renting and saving for homes this housing scandal has far reaching consequences down the road. Idiocy and short term self interest.
Ah great. More fuel to the fire. Incredible how little has been learned.
I hope they do make it easier.we all as irish citizens have been through so much in that recession and then bailing out the banks.Everyone has a right to own their own home.They have been renting homes and Apartments for over 7 or 8 years now not missing one payment in rent.if that’s not a first class record in don’t know what is.Young couples want to be able to feel secure in a home they can call their own and bring their children up in a safe environment. Stop this moratorium on giving out mortgages,build more houses and give people a chance again. They deserve it.The banks have and government have an awful lot to answer for damaging the morale and confidence of their citizens.
This is disgusting given that we are all still paying USC from the last recession , making it easier to borrow doesn’t fix the supply of properties.
Here we go again!
Tweaking with the LTV limits is all well and good but, the best remedy still is actually building f*cking houses. I’d like to see more action on this front from our lawmakers.
I can dream about it being done
I never seen the problem with saving a deposit for a home, you should be quite easily be able to get 10% of the value of the home, considering you are going to be paying this for the next 35 years. To drop that down just seems a bit bizzare, my issue is trying to get a loan by which I can actually buy a house. I max out at 170K, any decent house around Dublin is 250K. I’m a good saver but I can’t imagine I can dicky up nearly 60/70K over night. I thought the idea of these rules was to bring house prices down, if anything its made it harder to get a loan, lads that have cash scoping everything up and keeping prices high.
Property is only for the rich now.
Make no mistake folks, the needs of the banks and NAMA are coming ahead of Joe Public here. All they’re trying to do is increase prices to sort out the banks balance sheets and make NAMA residential property valuable again.
Great, the bubble is back!
We shouldn’t be surprised, the people who make these decisions live in the same mindset they have for the past 20 years. Whether it be Central Bank or Department of Finance they’ve learned nothing since the crisis and think the same policies that caused it will somehow now remedy it also. Frankly in an ideal world there needs to be a clear out of the old guard in both organisations, but that’ll never happen.
We need term limits
The boom just got boomier.
Why don’t the government do something about all the houses affected by pyrite. People are paying massive mortgages on properties that are worth nothing.
Sure what could possibly go wrong
The journal should ask the central bank about Johnathan sugarman.unbelievable revelations from him recently in EU parliament about Irish banking corruption,CB knew,and did nothing,actually threatened to have him arrested.
Still nothing for non first time buyers… Market will remain stagnant so as nobody can move out of their house to make it available for first time buyers!
@SL Photography: How will markets remain stagnant when a FTB will now only need 10% deposit max to buy your house? There in theory should now be more demand for your property.
@Stephen Watson: Yep My apologies you are right! I glanced through it and thought i read that it still only applied to new homes.
I have collected all my toys and they are firmly back in the pram now…. :)
@SL Photography: HOUSE FOR SALE!!!!
@SL Photography: I’ll take it!
We all partied. Again.
https://trickstersworld.com/2016/11/07/3947/
How about doing something significant for the thousands of us in negative equity? Maybe write off the portion of the mortgage that’s in the red?
And that wouldn’t drive up prices?
More customers, no increase in stock. Demand will go through the roof, people will be out bidding others with money they don’t have. In debt up to the eyeballs and when the next crash happens ( which it will and soon ) they’ll end up in negative regretting every minute of it. The boom is back
Second time buyers forgotten about as usual!
Why does any1 care about 2nd time?
Absolutely crazy. Words fail me.
Stoke that fire up again..let the property bubble begin (again)..Have we learnt nothing from the last crash.
I don’t see dropping the need for the 20% as a bad thing. The high cost of renting for some people makes it hard to save. They are sometimes paying the same or more than they would on mortgage repayments. I’ve seen friends having to move home with parents to save. However something needs be done about both cost of renting and house prices
Why are they again only trying to help first time buyers! People who bought apartments back in the Celtic tiger because they didn’t want to borrow beyond their means are now being punished in an environment of negative equity on these properties and are expected to raise a 20% deposit in order to try and upgrade from an apartment to raise families they didn’t have back when they bought! It is impossible!
On the hand you could have rented and not rushed in buying an apartment in the boom expecting to flip nicely in afew years .
Pretty incredible people who made poor financial decisions in the boom expect more concessions to do the same again!!!
Landlords rubbing their greedy hands as their property will increase rapidly . Higher rents. No social housing built and a minester covney up to his BLX in rental property bought out of the hidden cash in Cayman islands plus his annsbacker stash,he inherited from another crook his father minester covney senior
…and so begins the next credit bubble. Seriously we deserve everything we get.
As a home owner,Back of the net.
Ridiculous…
In ten years people will look back and think anyone who bought property between 2013- 2018 needed their head examined, just like how we reflect on property purchases during the boom. Let the lemmings jump off the cliff.
@Patrick:sadly a home is a necessity. With no protection for renters owning a home is the only safe way of guaranteeing not being out on the street. The government seems determined to bully young people into buying at a high price. Rent for 2k a month or get mortgage at 1.5k a month. Another rip off of the younger generation.
This will hasten the next crash. We are rightly f—-d
Brilliant strategy by the Central Bank, if they ever wanted to start the Merrygoround again this is the way to do it. Look out Mammy’s n’ Daddy’s and Credit Unions for Top Up’s to feed the Builders/Developers again. Where is the real policy on Rent Control and price stabilisation and why is the second time buyer suffering the 20% noose. Would it not have been better to have all at 15% and allow market movement where the second time purchaser would be up sizing and allowing more starter size houses enter the market ?. Think on Government and rethink this folly which is leading once again to a Builders Bonanza. SHAME
Here we go again
Don’t suppose extending the Tax rebate for first time buyers to those of us looking for second hand homes is on the table then???
Remember this day!
So basically they want more people to join the housing pyramid scheme. To rescue the developers who went boost last time round.
Does the central bank have anything to say about the land banks that NAMA and the nationalised banks own?
To the people who think this will just increase prices, you must think of second order effects.
The increase in prices as a result of this will stimulate supply. As proof, when prices were very high we built 90,000 homes in a single year.
People should be delighted they will soon have a wider selection of over expensive homes.
@Tom:
Yeah but people will have to be able to afford them, otherwise they’ll drop in price. Someone has to buy them.
A Government backed building boom.. open your mouth.. here comes the long term economic value aeroplane.
Zopone bring over kids from Greece god help them. But looks good in public eye . What is wrong with these people. They wonder why Brexit an Trump in USA is it any wonder.
Good news for first time buyers. No news for those of those in negative equity. They can just swing and stay where they are
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