“Valuations would be done by the State..”

At IrishElection.com Cian has already noted this, but it’s worth quoting the criteria under which the Republic of Ireland’s government proposes to extend loan facilities to first-time buyers..

Under the Home Choice Loan scheme, the Government will lend up to 92% of the value of a home to an individual buying a new house, provided they are a first-time buyer and earn in excess of €40,000 a year.

They must also be in permanent employment for at least two years, and be able to prove that they have been unable to secure a sufficient mortgage from a bank or building society. The loan will be at the commercial variable lending rate and the risk of each loan will be assessed using the same grounds that banks use.

Lending to those deemed not being credit-worthy has caused problems before.. just saying.. “as fears of a global recession sent world stockmarkets falling..”

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  • niall

    Someone has to say it so i will.

    This is stooopide.

    You should only value something based on what some poor sod is willing to pay for it. If no one is willng to pay whats being asked for it there is no market. The problem north and south is that there is no housing market at present.

    I’m a would be first time buyer and i am delighted that although i have waited a couple of years longer than i anticipated at my bearish worst, and i saw houses go up a lot more than i anticipated, I think we’ve finally reached market collapse.

    Are the govt going to frustrate me at the point of execution of my cunning plan? Was I wrong to do a little research instead of hanging myself with a mega loan? Should I have stayed with the madness of crowds?

    People are nuts so they’ll probably sign up for this in their droves, the developers will escape of to some tax refuge were the bankers and politicians will join them for port and cigars and I’ll continue to pay 1400 in rent to live in a place “worth” half a million.

    No doubt Bary McElduff, like the little wanabe Cuban he is will be chirping on about this somewhere as a great idea.

  • I dont care but no I do

    I always considered myself a nationalist but judging from the pure incompetence and downright cronyism that exists in all the political parties at the moment whethere it be FF, FG or Labour I am now as a Dubliner well prepared to vote the republic out of existance as the Irish electorate are too retarded to elect politicians who can actually run the place properly. I would prefer all of the following to run the country Shane Ross(even though he’s of a unionist background he’s got the balls to sort things out), George Hook, Michael O’Leary and Ivan Yates. I believe even Ruairí Quinn agreed with Michael O’Leary that the public sector should be halved

  • I dont care but now I do

    misspelt my name

  • There is not enough information here to judge whether this scheme is sound or not. The elements that we know about are not necessarily problematic:
    – 40,000 – this is a good wage and those earning are probably paying rent close to the same as a standard monthly mortgage repayment over 25/30 years
    – 92% – again not unreasonable on its own
    A key detail that is missing is the max multiple of salary the government will loan
    Comparing this to sub-prime significantly underestimates the sub-prime problem in the US.

    Btw – Shane Ross for Taoiseach – are you serious? Only if the qualifying criteria were linked to wind-baggery…

  • Glencoppagagh

    What justification can there be for a government financing property purchase? It’s not as if these people would be homeless otherwise so there is no reason for the governement to get involved
    What is wrong with renting? Is it a sign of moral degeneracy in Ireland that people need government assistance to escape from.
    You’d think that now the Irish would have turned their backs on their mindless obsession with property ownership.

  • Mack

    Pure cronyism. But hopefully,this measure is lipservice to FF backers and will not be seriously funded.

    There are roughly 40,000 unsold homebonded units according to the CIF. A basic calculation with a lot of dodgy assumptions would cost this at :

    40,000 * 285,000 = 10,320,000,000.

    So it would cost the exchequer just over 10 Billion to clear the backlog of unsold units (assuming that the developers sell all units at the max mortgage price – in some cases, this actually would constitute good value! – 5 bed family home – In all likelihood the developers will see this a minimum price.) This at a time when government had to raise taxes to raise 2 billion in additional revenue! Unfortunately, I think there is 18 billion in the National Pension Reserve 🙁

    Incidentally lending to borrowers earning 40k (presumably this could also be a combined salary, so very low earners on 20k each could apply) 285k is a salary multiple of 7. This would be extraordinarily tight for a couple. The risk of default would be massive, and the quote below does not inspire confidence!!!

    “and the risk of each loan will be assessed using the same grounds that banks use.”

    That said the almost silent introduction of a property tax on second homes was a great move. Hopefully this will be increased on a steep upward curve in subsequent budgets, giving scope for a reduction in the unfair stamp duty tax.

    It will also be interesting to see how the government handles the recapitalization of the banks in the coming weeks and months.

  • Suilven

    Just setting the groundrules for the impending nationalisation of their banks, perchance?

    http://ftalphaville.ft.com/blog/2008/10/17/17177/irelands-systemic-banking-problem/

    “The blanket guarantee for depositors caused howls of protest from other European countries at the time – but given the subsequent regulatory scramble, the Irish move looked shrewd.

    But is it enough? Alex Potter at Collins Stewart is not so sure.

    In a note to clients on Friday he observed that the credit crunch has had a rather fundamental impact on any bank with a loan-to-deposit ratio above 100 per cent – so Irish banks, with an aggregate ratio of 157 per cent, have a “systemic problem.”

    He reckons the Irish sector needs materially more capital — possibly as much as €18bn”

    “Potter says the two largest players, Allied Irish Banks and Bank of Ireland, both have property exposure worth 60 per cent of their loan books. But Allied Irish is weighted towards commercial exposure and in Ireland that currently carries more risk.

    At the same time, Allied Irish also has substantial overseas assets: 24 per cent of M&T;Bank in the US and 70 per cent of Poland’s Bank Zachodni WBK. Stripping out these listed entities suggests the stock market has already placed a value of less than zero on the Irish business.”

  • Suilven

    Forgot to add the most important part above:

    “ALBK and BKIR would both need to raise c. 6bn of capital to compare with the UK domestics. This is more than twice ALBK s current market cap and three times that of BKIR.”

  • Mack

    According to the Indo there is a fund of €500 million for this scheme – or enough for 1754 housing units (out of 40k units) mortgaged at €285k.

    It’s unlikely this scheme will make a significant difference to the direction of prices in the Irish market (or the fate of developers). Let’s hope they are suitably prudent (difficult to see how – when taking on people refused credit) with their lending and get a return on that money rather than putting tax payers money at risk during a time of austerity measures.

    http://www.independent.ie/national-news/budget-2009/analysis-overview/state-loan-will-not-distort-housing-prices-1499606.html

  • Henry94

    The point is not to help buyers but builders. It’s a disgraceful scam. How much longer must we tolerate this dreadful government, as the late John Healy used to ask (usually the day after they were elected)

  • I dont care but now I do

    Ulsterman Ireland fan I may have been a bit pissed when I made my posting but I stand by it. We need somone like the aforementioned to start running things. The republic has shown itself to be a bananna republic except there’s no banannas left. As Michael O’Leary has said previously the civil service should be halved. We need to get rid of the incompetents

  • OC

    If I remember correctly, the USA had a prior real-estate meltdown that affected so-called “Savings And Loan” banks back in the 1980s.

    Main culprit? Crooked appraisers conspiring with crooked mortgage originators.

    Helping folks get into property is smart for a timocracy – helps forstall a mobocracy.

    Too easy credit is still considered the main cause of The Great Depression.

    One way to balance this kind of approach is to require a higher capital gains tax on homes financed by the gov’t when they are ever sold.

    PS – HAHA! my code word is “sales”!

  • Cahal

    We have a government which is actually encouraging first time buyers into negative equity!

    The over 70s medical card thing was designed to draw attention from this developer bailout.

    This government has 6 months, tops.

  • Planning to have a new home doesnt mean that take it if it has cheap initial payment. Try to think how much thousands of dollars being vacummed on your pocket.

  • borderline

    So.

    If you earn 40 grand a year and are in a steady job, the govt. will give you a mortgage to enable you to become well off.

    If you are poorer than this, and a member of Larkin’s most noble class of people, you can just fuck off.

    Fáilte go hÉireann.