Too tough or not tough enough… what the experts say What the experts say
The rules were introduced at the right time and have assisted in keeping prices under control. However, most other countries have not taken the same approach with the majority only introducing loan-to-value (LTV) or loan-toincome (LTI) restriction, not both. We believe the exemptions, as currently structured, do not work. Also the inequality that exists in relation to LTV for first-time buyers and second-time buyers needs to be abolished with the same 90% LTV for both.
BRENDAN BURGESS
Founder of Askaboutmoney.com The Central Bank rules have kept a lid on house prices and any easing will simply push up the price of homes. We could be in a major bubble and it’s terribly important that house prices are controlled, so I think the rules should be tightened up, not loosened. For example, the maximum LTV should be 80% (instead of 90%) for first-time buyers. The fundamental problem is State agencies buying a disproportionate number of homes for social housing, not the Central Bank rules.
KEVIN JOHNSON,
Credit Union Development Association
The Central Bank could consider switching to rules used in some other European countries where mortgage borrowing limits are based on a maximum percentage of net income – a common metric is a maximum of 50% – that can be spent on all debt repayment including their mortgage. Those without a car loan or other debts can borrow more on their mortgage, which seems logical.
MICHAEL DOWLING
Dowling Financial
We are the only country that has
a limit of the LTI you can borrow AND the LTV. This needs to be reviewed. We need to move away from a multiple of gross salary to a percentage of net disposable income – a fairer mechanism that will help single applicants in particular borrow more with borrowings that are still affordable. The advent of 20-,25- and 30-year fixed rates, all sub 3%, makes this method of calculation sustainable as borrowers do not have to worry about interest rates rising. Also the exceptions on LTI or LTV should be spread over a threeyear period and not based on one calendar year.
JOEY SHEAHAN,
Head of credit with MyMortgages.ie
THE limits have contributed to bank lending being quite prudent and this has ensured that there is not an unsustainable credit bubble. However, the rules are quite restrictive. In particular, sole applicant first-time buyers may not be able to purchase a suitable property in an urban location because of being limited to 3.5 times their annual salary. Also the ‘nexttime buyer’ having to have a 20% deposit is punitive for those paying a high rent and unable to build up sufficient deposit. Some in this category may have little equity in their existing property… so why should they be discriminated against in terms of the mortgage they can attain?