Saturday 1 October 2016

Bank of mum and dad glosses over false promise of Central Bank home loan rules

Karl Deeter

Published 10/07/2016 | 02:30

'In Dublin, if you took €260,000 to be an 'average' house price (you won't be living on the Southside at all); you will be paying €1,700 every month you are made (against your will, due to arbitrary rules) to stay a renter'. Stock Photo: PA
'In Dublin, if you took €260,000 to be an 'average' house price (you won't be living on the Southside at all); you will be paying €1,700 every month you are made (against your will, due to arbitrary rules) to stay a renter'. Stock Photo: PA

When critiquing the Central Bank lending rules, the typical response is, "you'd say that because you are vested interest".

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It's true, nothing makes something more relevant and important than when your livelihood is at the centre of the issue.

Having survived 2010 in the mortgage business, some badly thought out new rules don't scare anybody. In fact, turnover is up year on year.

What isn't being discussed are the false promises that have come with those changes. Contrary to popular opinion, the rules didn't contain property prices - that trend was under way long before the rules were even mentioned publicly.

Imagine saying that the mid-day sun of tomorrow melted the frost that will come tonight and it happened today? That timeline doesn't make sense, neither do the claims that prices responded to the rules. The logical cart is in front of the factual horse in this example.

It didn't stop property prices from rising, at a time of near-zero inflation - and prices are still rising in Dublin, which leads the way in problems. Prices are still rising at an average of 0.65pc every month since the start of 2015 (that's about 60 times the rate of annual inflation).

This means that in Dublin, if you took €260,000 to be an 'average' house price (you won't be living on the Southside at all); you will be paying €1,700 every month you are made (against your will, due to arbitrary rules) to stay a renter.

The rules are arbitrary to the extent that first-time buyers were never the risky owners - the Central Bank's own research proves that. Keeping them out just means they pay more. The 12-month moving average has never been anything but positive since they were introduced.

The rules just push people out to less expensive areas. We don't need to know if this works or not, we tried it from 2002-2006 with disastrous results. We need to have cities where people can afford to live and work.

These issues - rising rents and the effects of social engineering pushing people out of cities - weren't raised by the those who make the rules, but it was raised by the vested interests... and promptly ignored.

Guess who isn't ignoring it? The hard-pressed parents who are now being pushed to reach further and further into their pockets to help their children buy a home. The bank of 'mum and dad' is now a top 10 mortgage lender in the UK, and the same is happening here.

Financial support in home-buying is going up, in our estimates by about 25pc. We have seen parental help rising, and the sums involved are ever increasing. Which proves that to get ahead it always helps to work hard - and have rich parents.

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