3/1/2024 0 Comments Avast remind me next century![]() Slim I hope that you are right in your projections of how the market will behave. It was much easier to pay high prices when the bank funded most of the purchase cost - when you have to pay more of your own money you are going to try much harder to keep the offer price down so you can keep your own capital commitment down.īy the way a judge in Ireland refused to grant one of the banks orders for reposession of some properties because thay lent funds without doing proper stress testing. The other issue on affordbility is that if banks are lending lower percentages of 'market value' - going from 95% loans (110% in Ireland!) to 75% - the purchasers have to put up more money by way of deposit. So less money to lend and greater risk management on what they do lend. Stress testing sensibly tends to limit how much you can borrow.Īdd to this that due to the failure of loan securitisation banks are having to rely much more on deposits to fund loans - and low interest rates will not encourage deposit growth. Current low interest rates do not mean that either loans are readily available or that you can borrow a whole lot more because it's cheap at present. ![]() I think (and sincerely hope) that banks have now rediscovered 'stress testing' of mortgage borrowings - ie what would your ability be to repay if/when interest rates are significantly higher. Slim I haven't.it would be a crazy bank that lends amounts based on capacity to pay using current interest rates. Manshimajin: don't forget the interest rates in a mortgage afford ability calculation! Was a house price 'bubble' in the UK just normal market movement here? I am still not convinced that we can buck the trend - but will be pleased if we can - but that is not good news for first home buyers. We also have too small a market to clearly see trends in the short term. I would agree that we have a somewhat different market here due to a number of localised factors. We will also probably see a fall-off in the number of people coming to the Island to buy retirement property - and those that do will come here with less money in their pocket and probably, due to lower interest and dividends, they will need to hold onto more capital to support their living costs. The other issue that ultimately may impact is that if new home buyers cannot get finance, starter home owners can't sell and move 'up-market' and this impacts on the 'chain' onwards and upwards. There is some ability to 'sit it out' for the time being but for a portion of the sellers this cannot be for an indefinite period. Slim that is fair enough but often people need to sell for other reasons - for example job move, job loss, downsizing, divorce, winding up an estate. With interest rates so low, people who at 7%+ may have been in trouble may be able to struggle on at 3-5%. So affordability of current mortgages is more important, in my view, than people getting new mortgages. In terms of a prices discussion, the prices will start falling when sellers become distressed and have to drop their prices.
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