Impact of Central Bank lending rules on the housing market.

The Central Bank has admitted that its controversial 80/20 mortgage deposit rules will have an “unavoidable” negative impact on the housing market.

The Bank insisted that it sought to minimise any unintended consequences but that “some spillover effects to other areas of the housing market are unavoidable”.

However, Prof Kieran McQuinn of the Economic Research and Social Institute (ESRI) warns of far-reaching consequences of the tough deposit regime.

He warns the measures may result in lower house prices, fewer houses being built and lower levels of mortgage credit being extended.

“Last year we built 11,000 units, but we need 25,000 units per annum to meet demand,” he writes.

In a statement to the Sunday Independent, the Central Bank insisted the new mortgage-lending rules were introduced to increase the resilience of banking and household sectors to property crashes and “dampen the pro-cyclical dynamics between property lending and housing prices”.

The Central Bank said it controls only one part of the overall range of policies needed to ensure a well-functioning housing market.

Meanwhile, tens of thousands of young adults will be excluded from buying their own home and will remain trapped paying sky-high rents because the Central Bank’s tough new deposit rules are an impossible hill to climb.

The representative professional body for licensed auctioneers, valuers and estate agents says that the rules must be softened so that cash spent by tenants on rents, which rose by €1,200 in Dublin in 2014, will be acknowledged as proof that borrowers have an ability to save.

IPAV President Pat Davitt told the Sunday Independent that there is a generation of first-time buyers who have been forced out of the market by the Central Bank rules, especially those who do not have the luxury of family being able to help with a deposit.

“This will be particularly acute in Dublin and other urban areas where prices are higher. For a house costing €300,000, a deposit of €38,000 is needed. At €350,000 the deposit required is €48,000. That is a hell of a hill to climb.

“This age group is in a particularly difficult situation because by the time they do manage to save, in a market where rents are rising, they could find themselves dealing with higher interest rates in a growing economy, unless policymakers bite the bullet and tackle that issue,” he said.

The mass sell-off at rock-bottom prices of whole blocks of apartments in the capital to investment funds is also contributing to the crisis, says IPAV, which has 800 members across Ireland.

“The issue is a severe lack of supply of suitable properties and a catastrophic failure of planning – planning for a population we knew was growing.

The new mortgage lending limits have been blamed for property prices falling in February for the second consecutive month.

Prices fell by 0.4pc last month (0.7pc in Dublin) after falling by 1.4pc in January. Though the figures come with the caveat that the first two months of the year are generally flat in the property market and many experts say that vendors overpriced property – particularly in the last quarter of 2014 – hoping to cash in on the rush to buy before the end of capital gains tax exemptions at year end.

However, the CSO figures do show that on an annual basis, residential property prices are still up by 14.9pc.

The average property price in Dublin now stands at €274,200, a rise of €48,000 in a year.

Outside the capital prices are up €12,600 to €165,000 in the 12-month period. The biggest issue is still a shortage of supply of new properties for sale

Data complied by The Sunday Independent.

#Thrifty Thursday- Online Billing

Utility companies have been accused of “fleecing” their customers by charging them for paper billing.

And there have been calls for An Post branches to put systems in place to help people who are missing out on savings of hundreds of euro a year because they do not use the internet to pay bills. Research has found those who do not use websites to get the best deals are losing out on savings of up to €400 a year.

Almost one in five adults do not use the web, according to the Central Statistics Office, and utility firms reserve their best deals for those prepared to make transactions online and switch from getting a bill in the post to online billing. One TV and broadband supplier, UPC, charges €42 a year for issuing postal bills. Insurance firms offer discounts of up to 20pc for families prepared to use the web to conduct business, with mobile phone, energy companies and banks all offering the best deals for online transactions.

Our Thrifty Thursday advice is ‘Don’t get fleeced’, many utility firms will use any opportunity to add on extra charges to loyal customers. So, until there is some reform to this area of unfair charges- get wise and get online!

Subprime Borrowers -Four Times More Likely To Be In Arrears

PEOPLE who took out a mortgage with subprime lenders are four times more likely to be in arrears than if they took a loan with one of the mainstream banks, new figures show.

The level of arrears for people who took out subprime mortgages is so high it makes up more than half of the value of all the mortgages owed to subprime lenders.

Subprime mortgages were issued to people who were turned down for finance by a mainstream bank. These people had a poor credit history or an irregular income. Start Mortgages, Springboard, GE Money, and Stepstone were among the subprime lenders during the boom.

Fianna Fáil’s Michael McGrath, who obtained the figures, said Government inaction on subprime mortgage arrears was “inexcusable”.

The figures supplied to him by Finance Minister Michael Noonan show that 19,935 mortgage loans issued by subprime lenders were in arrears of more than 90 days as at the end of December. This is an increase of almost 2,000 since end September.

The subprime sector now accounts for one in five of all the residential mortgage accounts that are in arrears for more than three months.

The value of subprime arrears amounts to €4.6bn, Mr McGrath was told. This is more than 54pc of the total outstanding mortgages issued by subprime lenders.


#Thrifty Thursday

Looking for a Thrifty Thursday saving tip that could benefit you while waiting to get on the property ladder?

One property management company based in Dublin are offering people a unique chance to live in extraordinary spaces for cut rate rent.

Under the scheme you act as a ‘guardian’ of the vacant property for the owner. The idea is that if the building is occuppied it won’t fall into disrepair and will ward off thieves.

So you could find yourself in a mansion in Dublin 4 for as little as €300 per month.

Follow the link for the full story