Are the central bank not supposed to be regulators of the market?
TLDR:
> ICS, which has twice increased its rates this year, has now told brokers that couples will need a joint income of at least €100,000 to qualify for a mortgage.
> It will only lend two-and-a-half times the income of applicants, compared with the three-and-a-half times limit imposed by regulators.
> Bonuses and other variable pay will not be counted in calculating applicants’ incomes.
> First-time buyers will only be approved for 80pc of the property’s value. That figure drops to 70pc for second-hand buyers.
> Broker Michael Dowling said the restrictions meant very few applicants would fulfil the criteria for loan approval. “If every other lender did this, it would bring the market to a standstill,” he said. He said ICS Mortgages was effectively saying it was closed for mortgage business at the moment.
The Venn diagram of people who have combined salaries of 100k and people who want 2.5 times their salary for a mortgage are two circles which aren’t touching.
Wouldn’t that pretty much stop everyone getting a mortgage? I’d love it if an average house was 2.5 times an average wage but that’s not the case for now at least. Maybe they are anticipating a crash? This doesn’t make a whole lot of sense unless they are afraid of people defaulting
Quite a big indicator of a starting recession. Less lending and loaning available, less growth in the economy
Seems bizarre to me. Two civil servants may well be on less than 100k combined, but have fantastic job security.
Not sure if I would read too much into this in terms of a slowing down of property lending. It’s one lender essentially shutting themselves to new lending for the rest of 2022 (by making their criteria overly restrictive) because they are a non-bank lender and don’t have access to a huge deposit book to fund their lending and as such are reliant on market based wholesale funding. The banks will continue to lend as before.
That said, from a competition perspective it’s not great. We were already down to just 3 banks (with only 2 of any size) with the non bank lenders supplying a very small amount of competition to them. If it becomes more and more difficult for the non-bank lenders to fund themselves in a rising Raye environment, we could see more of this.
Would this not just be the case of them reducing their risk tolerance after buying mortgage books from the exiting banks? They now only want the safest loans?
Theyre closing themselves off from probably 90% of mortgages in the country by being so restrictive. There’s not one single house in my local area I could purchase on 2.5x salary between myself and SO, and thats before even bringing in a 20% deposit requirement for FTB.
Most likely this is related more to their acquisition of KBC and Ulster bank loans than any other factors. That is, they are restricting the level of risk in any new lending in order to offset the level of risk in the new loans they have taken on. They’re a relatively small lender, so if they’ve acquired a lot of loans with a high LTV ratio, that will have a noticeable impact on their financials.
This just goes to show that the whole 3.5X legal limit is completely stupid. It doesn’t take into account interest rates. The legal limit should be based on net take home pay and not be linked to property price, but to monthly repayment amount.
Pretty wild that Lenders in the UK are offering 4.75-5.5x in some instances
What are rates like? I should think a 30 or 35 year mortgage would be super comfortable at 2.5x income
If I wanted to read the independent, I would find it myself.
12 comments
How is this allowed?
Are the central bank not supposed to be regulators of the market?
TLDR:
> ICS, which has twice increased its rates this year, has now told brokers that couples will need a joint income of at least €100,000 to qualify for a mortgage.
> It will only lend two-and-a-half times the income of applicants, compared with the three-and-a-half times limit imposed by regulators.
> Bonuses and other variable pay will not be counted in calculating applicants’ incomes.
> First-time buyers will only be approved for 80pc of the property’s value. That figure drops to 70pc for second-hand buyers.
> Broker Michael Dowling said the restrictions meant very few applicants would fulfil the criteria for loan approval. “If every other lender did this, it would bring the market to a standstill,” he said. He said ICS Mortgages was effectively saying it was closed for mortgage business at the moment.
The Venn diagram of people who have combined salaries of 100k and people who want 2.5 times their salary for a mortgage are two circles which aren’t touching.
Wouldn’t that pretty much stop everyone getting a mortgage? I’d love it if an average house was 2.5 times an average wage but that’s not the case for now at least. Maybe they are anticipating a crash? This doesn’t make a whole lot of sense unless they are afraid of people defaulting
Quite a big indicator of a starting recession. Less lending and loaning available, less growth in the economy
Seems bizarre to me. Two civil servants may well be on less than 100k combined, but have fantastic job security.
Not sure if I would read too much into this in terms of a slowing down of property lending. It’s one lender essentially shutting themselves to new lending for the rest of 2022 (by making their criteria overly restrictive) because they are a non-bank lender and don’t have access to a huge deposit book to fund their lending and as such are reliant on market based wholesale funding. The banks will continue to lend as before.
That said, from a competition perspective it’s not great. We were already down to just 3 banks (with only 2 of any size) with the non bank lenders supplying a very small amount of competition to them. If it becomes more and more difficult for the non-bank lenders to fund themselves in a rising Raye environment, we could see more of this.
Would this not just be the case of them reducing their risk tolerance after buying mortgage books from the exiting banks? They now only want the safest loans?
Theyre closing themselves off from probably 90% of mortgages in the country by being so restrictive. There’s not one single house in my local area I could purchase on 2.5x salary between myself and SO, and thats before even bringing in a 20% deposit requirement for FTB.
Most likely this is related more to their acquisition of KBC and Ulster bank loans than any other factors. That is, they are restricting the level of risk in any new lending in order to offset the level of risk in the new loans they have taken on. They’re a relatively small lender, so if they’ve acquired a lot of loans with a high LTV ratio, that will have a noticeable impact on their financials.
This just goes to show that the whole 3.5X legal limit is completely stupid. It doesn’t take into account interest rates. The legal limit should be based on net take home pay and not be linked to property price, but to monthly repayment amount.
Pretty wild that Lenders in the UK are offering 4.75-5.5x in some instances
What are rates like? I should think a 30 or 35 year mortgage would be super comfortable at 2.5x income
If I wanted to read the independent, I would find it myself.