New mortgage lending in Ireland in 2011 is on course to set record lows, with the number of new mortgages lower than any year back to the early 1970s. The conventional wisdom is that this is due to a temporary reluctance on the part of Irish domestic banks to issue normal amounts of normal-quality residential mortgages. Under this conventional view, Irish domestic banks must currently pass up otherwise profitable mortgage opportunities because of the banks’ temporary shortage of liquidity and the need to shrink their balance sheets. They are operating under a liquidity constraint. They cannot issue many residential mortgages even though they would profit from doing so. In the circumstances they are rationing their constrained liquidity, only issuing unusually high-quality (that is, super-safe) “gold-plated” residential mortgages to the first tier of very-low-risk applicants. Under this conventional view, once liquidity in the Irish domestic banks is back to normal, the banks will return to issuing normal amounts of normal quality mortgages, servicing a much broader range of customers.
The conventional view may be correct, but I wonder? Is it possible instead that the “normal” Irish residential mortgage is gone forever? Might the “gold-plated” mortgages of 2011 become the only ones available? If so, there are many policy implications, hence it is advisable to consider the possibility. I will give three reasons for speculating that “normal” Irish mortgage contracts might not come back until after Godot.
It is important to note that the random cash flow distribution from a residential mortgage, from the perspective of the issuing bank, has a small fixed upside and a large variable downside. The bank can at best profit modestly from issuing a mortgage, but it can lose disastrously. If events turn out well, the mortgage pays a fixed amount, spread out in equal monthly instalments over multiple decades. These cash flows provide a modest net premium over the cost of funds plus administrative costs. If events turn out badly, the bank can lose almost all of its capital invested. In an extreme case where legal and administrative costs outweigh any repossession receipts it can lose more than 100% of invested capital. This skewed cash flow distribution pattern means that the bank should issue a mortgage to a customer only if the probability of a bad outcome is very low. At mortgage issuance, weighted by long-term probabilities, the big prospective losses under bad outcomes must outweigh the small prospective gains under good outcomes. This analytical point about cash flow skewness is central to my argument. So why might the Irish mortgage market never return to “normal?” Here are my three reasons.
Reason #1: The probability of Eurozone economic and financial instability has increased permanently. This does not depend upon what happens in Greece or Brussels tomorrow or next year; it does not depend upon whether the Eurozone survives fully or partially or not at all. There is a considerable probability of an economic boom in Ireland, but there is and will remain a significant probability of another crisis. We are living and will remain living in economically interesting times. Bankers issuing long-term residential mortgages dislike interesting times (see the cash flow pattern above).
Reason #2: Recent legislative and regulatory changes, such as in the Land and Conveyancing Law Reform Act of 2009 and the Revised Code of Conduct on Mortgage Arrears of 2011, have altered the terms of all Irish residential mortgage contracts, both existing and prospective, lowering their cash flows in bad outcomes. These changes have been made to help currently distressed borrowers, but have the side effect of making banks less willing to provide new mortgages to any households that might possibly become distressed in the future under any foreseeable circumstances. Also, with a multi-decade cash flow horizon, it is necessary for banks to factor in the possibility of future legislative or regulatory changes that might make the value of extant mortgages even lower, for example by making the existing contracts completely non-recourse or without repossession value.
Reason #3: Over the long term, funding risk for Irish banks has increased and will likely remain so. This is no one’s fault; it is just a feature of the changed global environment. The institutional bank runs of 2007-2008 opened up new sources of funding contagion. Irish banks’ funding risk is not nearly as high now as it actually was during the property bubble, when they were reliant on the interbank-lending market for long-term funding, but they did not realize the risk then. Now, the banks understand clearly their funding risks, and the external environment has raised these risks, at least relative to pre-bubble periods.
Where is the positive spin in this dreary message? Perhaps Ireland needs to come up with alternatives to the “normal” mortgage market. In many continental countries, long-term renting is a widespread choice. Or are there new mortgage designs or banking innovations that could reopen the market?
40 replies on “The New Normal in the Irish Mortgage Market”
What a list.
I particularly like number 2. We passed mostly toothless laws to slightly move the balance of risk – which is still massively too far on the side of the borrower – and you want to blame that for the low number of mortgages.
First this article lacks fundamental data. It states – without attribution – that we’re on target for a record low number of new mortgages. However there is no information (attributed or not) in this article regarding the number of mortgage applications. Saying that banks aren’t willing to lend without that basic information is a statement unencumbered by facts.
Secondly there is a massive uncertainty in this market regarding the value of the goods being sold. NAMA is sitting on thousands of properties. Thousands of properties are under water and can’t be sold until the owners die, emigrate or declare bankruptcy. Which means there’s a slowly growing backlog of houses waiting to be sold. Buyers and lenders are rightfully waiting to see how this plays out – and since rental prices are dropping why shouldn’t they?
I know a number of people who have put off buying a house. One friend who made that decision did so after hearing an economist for an reality company say that they didn’t feel the bottom of the housing market was here yet.
Why would anyone buy a house now unless the deal was exceptional or due to some high priority need?
Blaming a minor uptick in regulation in an industry that desperately needs more is laughable – particularly with all the facts not in evidence. It’s truly a case of ideologically driven decision making – and worse still an ideology already proven bankrupt.
How many more people have to suffer till the freemarketeers will finally cop to royally screwing up?
Kevin,
It was the abundant supply of Euros due to ill-conceived currency union, tax incentives and the Galway tent that screwed up the Irish mortgage / housing market. None of these have to do with free market.
@Kevin Lyda
I added a reference about the number of new mortgages as you suggested. Perhaps you are correct that the regulatory changes are not a big deal, but what about reasons #1 and #3?
Dom K
So here was no lobbying in the Galway tent around tax incentives ( and God knows what else) ? And the big euro banks didn’t lobby the ECB or the MsoF around monetary union ? M-O-N-O-P-O-L-Y
It is critical to note that the finance houses, who issue(d) residential mortgages are 50% to blame for this mess: our politicians and regulators carry the other 50%. The former lobbied hard for lower lending standards. The latter obliged. Did anyone, who clearly understood what was occurring, have any doubts about an ‘interesting’ outcome? I doubt it.
So, attempting to attach blame to the unfortunate borrowers ( a handy target) is simply wrong, no matter how stupid they were in ‘demanding’ mortgage loans that (the lenders knew) would run into trouble.
For a very long time – perhaps more than 120 years there existed a stultifying and boring and most uninteresting protocol for lending for the purposes of a mortgage on a private residential property. That got well and truely trashed about 15 years ago. So, it looks like we may have to go reverse a bit?
We do have to have sensible, prudent and practical lending practices for private residential mortgages: 20% cash downpayment (cash, not funny stuff!) and an upper limit on loan, based on either a rental yield or a very small multiple of salary. I’m not fussed about either of these. I’m open to persuasion as to which is least likely to be problematic.
House prices (open market values) have to decline to their pre-1996 levels. That is going to be very, very interesting indeed.
If, and its an iffy if, our dopey and easily suaded legislators can get their jellybean filled brain cavities around it – we will have mandatory non-recourse mortgages for private (home) residences, coupled with fixed-rate mortgages. Then, we need a relatively simple legal process for personal bankruptcy.
These two alone would act as a significant regulator of mortgage lending for the private sector.
One extra, essential element. The finance house/s that lends into the private residential mortgage market CANNOT be involved in any other form of financial business. The scarcely regulated ‘multitasking’ by the financials is one of the principle reasons we are in this unholy mess in the first place.
There are daily complaints that the Labour Sector is being very naughty and resisting reforms. Terms like competition and productivity are flung around like slurry from a tanker sprayer. And the Financial Sector? A model of reform? “Pull the other leg, its go a bell on it”
Do we need a ‘new’ residential mortgage design. Not really. The pre-1996 design was adequate. Liberal application of rubbing compound and a brisk buffering and the job is oxo!
Brian Snr.
Great article,
its the old stability breeds instability & instability creates stability argument.
Most of the money supply might not come from commercial bank lending for a generation after this – hopefully
On a postive note the eurosystem balance sheet is now expanding modestly somewhat – which is good for Ireland long term.
A bank is expected to have capital reserves, and leverage funding against same. So the old rule was €8 in reserves(sub debt, cash) and then could lend €92. The regulators paid extraordinary attention to the makeup of the 8 (with various risk ratings etc) but very little to the 92.
So banks chased 100% mortgages, even offering them to buy to let (higher default probability). A relative with a large portfolio of internation buy to lets, reports almost never getting over 70%.
A mortgage is meant to be a liquidty product (with a modest risk buffer). But banks see themselves as having a free lunch on the LTV. I would suggest it is high time for dynamic risk weighting, with the V calcuations redone yearly.
Also more long term renting (and legislation to facilitate same), would benefit everyone. Frankly most people lack the financial literacy to understand that a ‘buy as primary residence’ vs ‘renting’ is actually an investment decision. and such a discretionary decision would normally benefit from actuarial advice etc. Perhaps require the mortgagee to pass a financial literacy test, else the bank is required to set aside another x% capital for that mortgage.
An additional wrinkle of the bubble was that the banks were playing both sides of the game – they were funding construction and land speculation (often taking equity stakes) and funding the purchasers of those constructions. They were complicit during the boom and had an incentive from other divisions to push mortgage lending out without taking too much care about it.
This conflict of interest no longer exists – the banks have no interest in funding borrowers who will purchase from NAMA.
Some obvious moves:
1. A return to building societies/banks that only do mortgage lending – utility banking; there is no good reason this has to be private sector. A parallel with this is deposit taking banks that lend to the mortgage banks with the lending of the deposit taking banks credit enhanced by either state or private (for a market-based cost).
2. A limit to recourse – my preference is for it to be limited to multiples of tax declared income. Consumers are free to take on debt up to that level and can choose whether it is lifestyle debt or mortgage debt.
3. Margin and LTVs and the cure for deflation… once overall margins return to a healthy profit amount and prices bottom (the cure for deflation is deflation), then lower than bubble (or other market) LTVs will look attractive.
There are, I think, two good reasons why mortgage volumes are low which exclude the banks:
1. Lack of credit-worthy borrowers with a deposit.
2. Prices are still too damn high and all the spin from government, EAs, banks, stockbrokers &c is slowing a move to normal pricing. It is clear that many people, not just in Ireland, think that prices are too high and while that view persists and firesales are avoided, stagnation is the likely outcome.
I was disagreeing with everything you wrote until the last paragraph.
The main issue is getting over the obsession of owning property, be it an apartment, house, land etc. Long term renting is something that Irish people will need to embrace in the near future. I say this as someone who took out a 30-year tracker 4 years ago and due to planning issues is paying off that mortgage and also paying rent in another house.
The “new normal” should not be focused on an arbitrary mortgage lending figure. It should be focused on actual consumer need and banks’ need to get back to conservative, but not excessively prohibitive, lending terms.
Again, I speak as someone who received (very easily) a 100% mortgage in 2007.
We need to open our minds to new ideas when it comes to property and get over our historical obsessions with property and land ownership.
@Kevin L
“Blaming a minor uptick in regulation in an industry that desperately needs more is laughable – particularly with all the facts not in evidence. It’s truly a case of ideologically driven decision making – and worse still an ideology already proven bankrupt.”
If you loosen the “recourse” characteristic of a mortgage market you increase the risk premium that fixed income investors (where the mortgages are securitised) or bank shareholders will demand to induce them to provide the funds.
The only way to avoid this is to subsidize those bank shareholders and mortgagees using taxpayer’s money.
@Kevin Lyda
“How many more people have to suffer till the freemarketeers will finally cop to royally screwing up?”
In reply, I can’t match the eloquence of a Mr Geoff Wales in today’s IT.
Sir, – Fintan O’Toole misunderstands the terms capitalism and socialism (Opinion, October 4th). Under socialism, the means of production is collectively owned, or owned by the State. Our current crisis is financial in nature. It originated with a massive expansion of credit, which was caused by a massive expansion in the quantity of money. Government controls the process of money production by selling debt. It increases money supply using the central bank and distributes this money to its banks. It protects its banks, because they are necessary components, of the state-run, money-production process.
Modern money production is the pinnacle of a socialist structure. It is not a free market. It is not capitalist and is profoundly unfair and discriminatory.
His article misrepresents history. All the events he mentions were preceded by government controls of the subsequent failed system. The Federal Reserve was created by government in 1913, just prior to the 1920s and caused the Great Depression with loose monetary policies. Nixon dissolved Bretton Woods, because the US was haemorrhaging gold. US banking reform in the 1990s increased banking protection (with the Federal Deposit Insurance Corporation, Fannie Mae and Freddie Mac) provided by the state rather than exposing banks to market forces. The common thread in these events is government expansion of its power over money supply and the sale of its own debt. He should be calling for an end to the socialisation of money production. Yet he calls for the opposite. Mr O’Toole, what is socialism and what is capitalism? – Yours, etc,
Is the 2011 style mortgage the new “normal”? I certainly hope not. Banks are still offering loans of five times salary. They are still accepting deposits as low as 8%, which is about enough to keep the borrower out of negative equity for 6-10 months.
The banks are lending at very low rates on the basis that they have security over the asset, despite the fact that the bank has a very limited ability to turf people out of their homes to seize the security. The rates at which they loan money to individuals are lower than the rates at which the Irish state can borrow money, which suggests to me that the mortgage rates that banks charge do not reflect the risk or cost of funds. I guess that, on average, mortgage lending is a loss-making activity for the banks, and will eventually have to be paid for by the owners of the banks, that is the Irish taxpayer.
I certainly hope that 2011-style lending is not the new normal, because we can’t afford for the banks to be loss-making indefinitely. At some stage they need to either return to the prudent lending standards of the past, or start charging mortgage rates that reflect the risk and cost of funds.
Of course the eroded deposit base will deflate the insanely populist party rhetoric demanding ever more credit for buisnesses and individuals to buy and invest in deflating assets and businesses, exacerbating the current debt crisis with near future additions – its juvenile to even consider that easy credit should ever return and simply put the reduction in credit will accelerate the necessary deflationary process and get our costs preferably 16% below the European average rather than 18% above it
No reason for houses to be even 3 times one salary in such an underpopulated country as Ireland – in the 1980’s we spent 30% of our salaries on food today its 10%, property will go the same way. Fact is we will to save more to fund ou retirements and the savings should go there
@Rothbard
Do you agree there is a difference between money & credit ?
I did not see a massive rise in the wests money supply during the 80s and beyond.
The banks just leveraged a tiny base.
Little money was available to build core wealth building capital utilties – it was just subsistence stuff so that our banks could be “inventive & dynamic” without that nasty consumer inflation thingy.
The credit was just a artifact of oil / gas capital extraction.
Most of this modern crisis comes from CBs monetarist targeting of interest rates rather then credit creation to control inflation during the 60s and beyond.
They could do it as long as they could continue to extract underground capital & not record it at a higher & higher rate – now they can’t.
This is a dollar/ oil crisis – its post Great War life phase was all about exploiting the stuff as quickly as possible – now that oil is in decline the monetory system must break from it if it is to survive.
Things are quite complex in the Irish property and mortgage markets. If we are to believe that the housing market has dropped 42%, the banks are teetering on the edge of insolvency and the Gov’t is going deeper into debt every month then there is a justifiable lack of confidence on the buy side. If the public perception was that the market has nowhere to go but up then money would be pulled out from under mattresses and offered to buyers through the usual middlemen solicitors, auctioneers bank managers. I lived through a period in one country where the Gov’t of the day cracked down on bank lending and very quickly the vacuum was filled by private lenders, at a slightly elevated rate of course. If there is a need it will be filled one way or another. We are not as reliant on banks as a lot of people believe. Banks are middlemen and the world has never lacked middlemen.
I find it hard to believe we have actually arrived at the new normal yet. Give it another couple of years.
ECON 101: Demand and Supply will always move to an equilibrium position: the Price. Its Gospel – I read it in McDowell, Thom, Frank and Bernanke: “Principles of Economics” With authors like this, all heritics shall perish!
Now just excuse me a mo. Price of money is effectivelly zero, (why?). Quantity Demanded (of money for residential mortgages) is low, (why?). So the Quantity Supplied must be …..? Hmmmmm.
Money = Cash + Credit + Debt + Interest on Debt + CDO + MBS + “Whatever your having yourself!” And debt does what? Expands, magically!
There’s your problem. Cure that and your home and dry. But our loyal servants, the Banksters have shilled: “NOT AN INCH!”
@MH: Thanks for reminding me of that 10 week bank strike. Sky still up there? Yep. Right as rain it is!
@DoC: I realise we might not see i2i on the money bit. Concept is a tad contested. B. 15 Rounds in the National Stadium 😉
Brian Snr.
“Money = Cash + Credit + Debt + Interest on Debt + CDO + MBS + “Whatever your having yourself!” And debt does what? Expands, magically! ”
Everyone should remember this! And as long as Money as defined above expands faster than the rate of production, we will continue to have mis-allocations like we had in finance/ housing in the noughties, IT in the 90’s, etc.
@Gregory
Your post is timely given the anticipated Govt report on the distressed mortgages debacle but it raises a couple of issues for me.
You suggest in your last line (as mentioned in a comment above) that in the longer term we maybe come a country of renters. But the obvious question is who funds the landlords?
Unless you believe property will be a cash only transaction I think you’ll find funding is likely to be done by the banks – and the question that arises as a result is on what basis or why would a bank give a landlord the cash before a normal 5/8. I believe the answer lies in the landlords business model (as in most businesses) but the issue is now valuation and payback.
Valuation in property as I’ve suggested here many many times should not be confused with the financing method – both are very different sides of the argument. The business model would no doubt have a lending bank very worried about net rental yields because ultimately thats where the cash comes from to repay the bank and in the event of non repayment that bank would presumably want to ensure the cashflow remains intact and therefore would it not stand to reason that the value of the properties should only ever be a function of the rents they can generate?
I believe the answer is a resounding YES. This means that in in the event of default by the landlord (for whatever reason) the bank has to ensure a rent that is priced in line with the market is collectable and it brings us back to the fundamental reason why I believe we’re contiually missing the point on this issue. The issue is a basic mis pricing of the property asset class for a decade.
If the rental model above had been in place for the past decade then it is likely banks would be very keen to understand the rent the house was able to generate today and into the future. Now cast your mind back to what in fact the banks were and still are sadly really concerned about when you were taking out your mortgage? I’ve checked mine list, twice in fact, and the question of the likely rent of a similar house in the area generating as a proxy to mine was NEVER asked. The banks were worried about P60s and how long I was in my job and my wifes income and how long she was in hers and proof of same from employers and copies of bank statements and others assets etc etc. All of which is complete horseshit – because the only real question that they should have ever concerned themselves with is what rent the house would earn in the event of me not being able to repay the loan and can the rent cover the loan. End of.
So the NEW NORMAL may indeed be a place where questions of rental yield are back on the agenda. They have been off the agenda it seems forever and boy are the banks regretting not asking that basic question.
Valuations based off rents will see yields revert to their long run average of 7% at the minimum. This means that the minumum PTT falls we are going to see in Irish housing will be a fall of 67% – given the over supply in the market and the information generating from the recent auction results – prices will likely fall to where yields get to about 9% this means PTT falls will in fact be closer to 75% to 80% but rest assured 67% falls are a given.
On a related point comments such as yours reminds me of similar top of the market comments such as ‘it’s different this time’. Don’t kid yourself when the prices are right (and they are clearly not with the CSO figures at c42% off the top) banks will lend into this market. The underlying asset price is the key – when banks believe the prices are right they will lend again, its their bread and butter boring business which when done properly makes money.
Banks in a leverage driven asset market such as property price the undelying asset given that they control the oil that lubricates the price. Without the leverage the prices will fall to where cash only buyers believe they can make money – and as indicated that means assets that are priced at a premium to equivalent risk free altenatives – the Irish 10 year is at c7.5% today so expect property yields to be priced off yields at a premium to this number – what do you know that’s exactly what’s happening.
So whilst I accept there are severe difficulties the banks have been the authors of their own demise. Banks always and I mean always have the opportunity to say no to any deal – they forgot to say no when net rental yields were screaming no (q1 2006 in D4/D6 net yields were below 1%). For this mispricing error the banks will need to bear the burden as the customers cannot afford to fix the Govt and the banks.
Strange analysis….”large variable downside”. How much did Irish mortgage lenders lose say up to 2007 ? I’d say next to nothing. Probably the most reliable, consistent, low admin part of their loan book. You are analysing a bubble and the biggest property crash ever recorded in the western world and then trying to draw conclusions from abnormal circumstances.
Plenty of room for innovation in the Irish market – non recourse loans (what was the point in a bank insisting on “independent” valuation of the property before drawdown – did these valuers have professional indemnity insurance ?), buying out trackers, capped mortgages which are standard in France, insurance against % of negative equity etc.
@El Leader Maximo – you are confusing event-outcomes with probabilities. E.G. commercial air travel is very safe but if a commercial airplane crashes, lots of people die. It is safe because the probability is low not because the event-outcome is small, same as realized cash flows on mortgages.
@YoB: Thanks for that useful comment. Finally, took a bit of time – but the penny – ye olde one with the hen and chickens has now dropped.
is – 75% possible? Looks like it might be.
Brian Snr.
@Brian
To me if you believe in mean reversion then quite literally any number is possible but 75% can easily be verified:
Per DAFT.ie peak asking rental yields for the market got to 3.2%
To get back to net yields from asking yields take the market average of 11/12 i.e. 3.2% *11/12 = 2.93%
We know that rents have fallen by about 26% since the peak i.e. 2.93% *.74 = 2.23%
Now to see 2.23% yields to move back to 7% house prices would at the minimum see falls of 2.23%/0.7 = c32% i.e. a ptt fall required of 68%
The average yield we’re seeing at auctions is more akin to 9% now if 9% is applied the falls have to be c75% i.e. 2.23%/0.09 = 24.8% meaning ptt falls of 75%.
Sadly we know many yields at the top were not average they got to below the 3.2% above – so falls would have to more than 75% at the 9% level today taking renatl falls and yield valuation metrics into account.
More importantly the CBI PCAR numbers to me underestimate this issue – in fact the term ‘rental yield’ is not even mentioned in the 31.03.2011 document. It seems off that we can spend €30m preparing a document which is fundamentally about property valuation and the ability of those to repay the debts associated with it and the authors fail to mention to key valuation metric. Strange but true – go check.
“The bank can at best profit modestly from issuing a mortgage”
There but for the grace of God, go we… What next! Building societies or some such!
The other important side to this discussion, ignored by the author, is the spectacularly poor housing / dwelling stock that was constructed during the bubble, there are few properties that could be considered in the “golden” echelon and many mortgages during the boom years were issued for pieces of crap that passed as apartments, up and down the country, not just within our cities.
It is a testament to the Irish that we have managed to construct “homes” with the least amount of dwelling space per capita in Europe’s least densely populated country. With almost zero standards of insulation from both an energy conservation and soundproofing perspective.
Ozymandias would weep…
There are other options, once we get past our archaic and ill considered planning laws which have given rise to the corrupt state of our nation. Collectives developing sustainable housing projects, building on the ashes of what went before but a semi-d or a terraced apartment in Sligo probably has no future and it’s related cousin, the mortgage – “the dead pledge” may long be departed?
Buying for cash might be the only future for these places, once our lost century is accounted for (and the NAMAs, AIBs, BOIs have gone by the wayside)… Ireland created the world’s largest property bubble in terms of its impact on a per capita basis and on the finances of its host nation, it’s only appropriate that the results and ramifications will be equally fantastic.
Look on our works, ye mighty and despair!
I recently applied for a mortgage with a LTV below 60%. The modest loan amount that I requested was revised down substantially and I was eventually offered around 3.5 times my income which would result in me paying a mortgage that is about €400 per month below what I am currently paying in rent. The result is that I may not be able to buy the house that I want and eventually I may move my savings elsewhere.
This is not any kind of normal, “new” or otherwise. In fact, it is almost irrational on the part of the bank and can only be explained by a lack of liquidity.
one more point:
“a residential mortgage, from the perspective of the issuing bank, has a small fixed upside and a large variable downside”.
This is the nature of banking and is recognised as such in Basel II. This is the very reason that large “unexpected losses” in the heavy tail of the highly skewed loss distribution need to be capitalised for.
There is nothing “new” about this and it should not introduce a new regime for mortgage lending.
@ yields
‘So whilst I accept there are severe difficulties the banks have been the authors of their own demise. Banks always and I mean always have the opportunity to say no to any deal – they forgot to say no when net rental yields were screaming no (q1 2006 in D4/D6 net yields were below 1%). For this mispricing error the banks will need to bear the burden as the customers cannot afford to fix the Govt and the banks’
They forget to say no because they swallowed their own BS about Ireland becoming a society of L’Oreal propertry swankers. Renting was for losers, so rental yields didn’t matter.
@ Carlo
‘It is a testament to the Irish that we have managed to construct “homes” with the least amount of dwelling space per capita in Europe’s least densely populated country. With almost zero standards of insulation from both an energy conservation and soundproofing perspective’
Maybe a testament to what centures of colonial government and religious indoctrination does to people’s minds. We are a quasi-developed nation I am afraid. Paddy Kavanagh had it right.
@Bazza… Be happy that you are saved from your own profligacy!
“I was eventually offered around 3.5 times my income”
3 times your income or rather to quote international studies, 3 times your household income is generally regarded in this perverted world as the metric of stability in the housing market.
I have some idea what your expectations are, a leafy four bed semi d in South County Dublin, no doubt… Perhaps you should look more to the metaphysical…
@Paul Q… I’m afraid we are on our own here, although, I would be much more lofty than your good self in praising the global Irish in their achievements in giving the world, the mafia, crony capitalism in all its glory and the true definition of a banana republic.
Sure, let the overlords take their justified acclaim but give us our rights as the architects of corruption both institutionalised and overt… An Irishman will fight for anyone’s freedom but his own, there’s no margin in it after all…
A welcome and apposite thought today during our global economic forum!
@grumpy Says:
“””If you loosen the “recourse” characteristic of a mortgage market you increase the risk premium that fixed income investors (where the mortgages are securitised) or bank shareholders will demand to induce them to provide the funds.
The only way to avoid this is to subsidize those bank shareholders and mortgagees using taxpayer’s money.”””
We already did the latter. So that step is complete.
Surely “the new normal” would have to involve the sovereign being able to issue bonds in the market and the banks being yoked free of the ECB teat with mortgage rates linked to bond yields and so on.
The current situation is as real as Terry Wogan’s hair colour.
“I have some idea what your expectations are, a leafy four bed semi d in South County Dublin, no doubt… Perhaps you should look more to the metaphysical…”
Give the man a break, he said he was looking for a modest amount.
I’m pretty sure Finland is less densely populated than Ireland. Maybe Sweden too.
@ Yields or Bust
Which, combined with the “House prices only ever go up” mantra, goes to show how the banks were actually selling debt during the bubble.
They were actually, through recourse mortgages, doing a NPV on the future cashflow of the applicants – and simply turning them into wage slaves.
They didn’t care about the underlying asset – it was merely a vehicle for turning looser lending criteria into debt/profit.
So banks were simply working the debt plantation.
@What Goes Up — That goes back to my reason #2 why there are only gold-plated mortgages issued now. Under the new regulatory/legislative environment in Ireland repossession is nearly impossible. Perhaps the banks should rely on pinky-swears?
@John Ihle
Interesting article on Capital D. It was not clear if Bank of Scotland may suffer a large write write off, compliments of the limited liabaility structure, if the very high profile investors refuse to put in additional capital.
If BOS / Certus will suffer a large write off, as is looking likely it will probably encourage the bank to dig its heels in harder when it comes to ordinary mortgage holders in trouble, so as to limit the bank’s overall losses.
So we should expect another high failed roller betting slip being passed down the line.
http://www.sbpost.ie/themarket/capital-d-investors-weigh-up-their-options-after-booking-big-losses-58853.html
Do keep us ‘Posted’.
@Gregory Connor
re
“…because of the banks’ temporary shortage of liquidity and the need to shrink their balance sheets. They are operating under a liquidity constraint. ”
But I thought Trichet said that there was no problem with liquidity. The ECB stands ready …..etc.???
Meantime the ECB is complicit in the greatest deceipt perpretrated on EZ depositors ever.
The collateral that was available to depositors is disappearing every day as unsecured bonds are being replaced by secured funding only.
The result is that the security available to depositors within banks is being eroded on a daily basis.
Depositors will therefore be left to rely on tax payers as all bank collateral will have been taken by the high rollers.
It also looks like the ECB have no intention of allowing deposit proctection until all the collateral is gone to the big boys.
And Europe wonders why it does not have a stable banking system!
Ireland should prepare for exit from the Euro, a currency and banking system run by the ECB on behalf of and for the benefit of Germany.
@ Gregory Connor
In memory of the entrepreneurial genius that was Seannie Fitz I ripped and uploaded his Marian Finucane interview from three years ago:
http://www.thepropertypin.com/viewtopic.php?f=4&t=41222
His biggest fear seemed to be we’d end up with no domestic banks and be like “New Zealand”.
Haven’t heard Comical or Mickey, or previously Comical Leni, threaten this dire future for us – but the price we’re paying to keep the domestic pillocks seems a tad high to me – so much so I could possibly have lived with going Kiwi!
The pillocks have gone from having a minority market share 30 years ago to being a duopoly today.
That’s the new normal now.
The state effectively owns this duopoly.
That’s the new normal now.
The state has become the biggest commercial player via NAMA.
That’s the new normal now.
Any legislative changes that the state now implements (the Upward-Only Rent Review debacle being a classic example at the moment) to current or future contracts is shooting itself in the foot.
This will all end in tears.
Jim Puplava with a perspective on another version of the New Normal :
http://www.financialsense.com/financial-sense-newshour/big-picture/2011/10/08/02/jim-puplava/trying-to-understand-the-new-normal-california-americas-greece
“Trying to Understand the New Normal—Why the economic models are broken “
@jihle, the stats were wheeled out yoinks ago on the ‘pin, I can’t be arsed to drag them up but the thread exists… If you have evidence to the contrary (the South shall rise again!) then clearly go for your guns, either way, what are you are suggesting! That we’re number three rather than number 1! All in all, I’ll take build quality of homes / dwelling / public infrastructure in any of our Scandinavian neighbours as being of a haughtily superior quality to any of the crap that passes for housing stock round here.
Natch!
Vote Bob Dole!
White…. White…. White… Black… Black… Black…