During the height of our property mania it required upto 17 times an average salary to buy an average property in Dublin. And with the flames of economic expansion, double-digit annual growth in property prices, a perceived shortage of housing and salaries inflating nicely, there was no shortage of buyers for those properties.
Now that the crash has come and with over 10% of mortgage borrowers experiencing some sort of stress (32,000 > 90 days in arrears, an estimated 45,000 mortgages have been restructured and 16,500 mortgages are in receipt of State mortgage interest supplement – 93,500 mortgages in total out of 790,000-odd mortgages in the state), the Sunday Tribune reports that the Financial Regulator is considering steps to prevent more mortgage madness and another housing bubble. Arguably closing the gate so soon after the horse has bolted is toe-curlingly unsympathetic to the widespread damage already done but with First Time Buyers making up the largest portion of new mortgage lending and in a property market that still appears to be falling and where unemployment is at a high level (though stabilising) and where wages may come under increased pressure, maybe the Financial Regulator’s rumoured proposals are not as ill-timed as they first seem.
According to the Tribune the new rules would seek to put ceilings on Loan to Value rates (the percentage of the value of a house that the bank will advance as a mortgage – typically 75% these days though it was as high as 125% during the boom). With an average price of just over €200,000 at the end of March 2010 according to Permanent TSB/ESRI, a First Time Buyer might have to come up with €50,000 of a deposit, a substantial sum which might bar buyers from the market for some time or cause property to fall further. Non-First Time Buyers might need to come up with even more because they may first need to pay off any negative equity (affecting an estimated 150,000-200,000 mortgages with an average negative equity of €38,000). Of course 60% of properties in the State don’t have mortgages and apparently as a nation we have been saving. However it is difficult to see how any new rules restricting the value of mortgages might not lead to a reduction in prices.
There have also been rumours that new systems might be put in place so that the overall credit position of an individual might be assessed when considering additional credit.
NAMA Wine Lake 