Comment: Punchbowl has been taken away a bit too late
An old saying goes that the job of a central banker is to take away the punchbowl just as the party gets going.
That's what the regulator tried to do yesterday, although he's a bit late; some guests at Ireland's latest party are already throwing up in the garden.
Let's be clear; the tools announced by the Central Bank are crude and the effects on some individuals will undoubtedly be cruel. Still, no regulator worth the name can allow house prices to continue rising at 40pc a year as they are in parts of south Dublin.
The bottom line is that this country cannot afford another housing bust and we were heading down that path at breakneck speed until yesterday. An army of economic experts demur but we are in the middle of a credit-fuelled property bubble and that's always bad news. The cheapest interest rates in history combined with the fastest price increases ever recorded in this country look awfully like a bubble to the man on the street even of the experts don't see it.
High property prices are tempting to this Government because they reduce bad debts on bank balance sheets and make voters feel good.
High prices are dangerous to individuals who may be left unable to repay loans when interest rates rise and they are dangerous to the country as a whole because they push up salaries and cut productivity.
The howls of protest against the Central Bank yesterday from those looking for a house are understandable. Some will now rush to buy something, anything, before the new rules take effect in January. Others will have to put their dreams of buying a modest house on ice. They have been shafted; especially those who were waiting for the end to investor incentives due this January. Once again acting sensibly by delaying gratification is rewarded with a slap.
But what was the alternative for the Central Bank? To sit on its hands as prices rose further?
The Central Bank said yesterday that some lenders have already made loans that won't be repaid. The lessons of the boom and the bust are simple enough; bankers cannot be trusted to lend responsibly now or anytime in the future.
The sad thing is that this intervention came too late and follows disastrous property price increases in the capital. If prices now fall, some people who bought homes in recent months will be left in negative equity. Action should have been taken many months ago but a regulator that is out of touch waited too long.