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07 Mar 2017

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Mortgage affordability for First Time Buyers (FTBS) continues to improve, says a new study by consultants DKM for EBS (Jan 2016).


The average FTB mortgage of €178,225 ate up around 19.1 per cent of a FTB’s net income last year.

That compares with 19.5 per cent in January 2015. And it’s down from 20.6 per cent in 2014.

The EBS/DKM Affordability Index suggests a few reasons why things have been getting a little bit easier for FTBs who manage to get a mortgage:

  • The upside of having to come up with a bigger deposit – as per new Central Bank (CB) rules – is that you have to borrow less. Hence the average Loan-To-Value ratio for the study fell to 80% in 2015 compared with 83% the previous.
  • Wages rose almost 2% last year.
  • Mortgage interest rates also fell to 3.7 % - from 4.4% a year earlier.

The new Central Bank rules also appear to have halted what many feared would be the runaway train of rising property prices. As the rules kicked in, Dublin property prices started to fall at the end of 2015 - and the country as a whole followed suit in January.

Where prices go from here is anyone’s guess, but a review of the deposit rules by the Central Bank due to take place over the summer could be a deciding factor.

The rules are like a brake. The Central Bank can control prices by taking its foot off the pedal – or leaving it on – as it sees fit.

It’s hard to be single

Of course, there are many more factors affecting affordability – such as where you live and whether you’re buying on your own.

Single buyers have long found it very hard to afford to buy their own place. Affordability improved a little for them in 2015, but it’s still very challenging. They would need to use 38.1% of their net income to repay their mortgage, even after they raise a deposit.

A Capital price

First Time Buyers are also hard-pressed by the price premium commanded by homes anywhere near the capital.

FTBs there need to come up with a deposit of €31,000 (12% of the house price) and have a minimum income of €76,000 just to buy an average home.

But at least, buying a home in the capital became a slightly more affordable proposition last year.

Repaying a mortgage in Dublin cost FTBs 21.3 % of their net income in January, down from 24.3 % in October 2014.

Beyond the Pale

House price increases outside Dublin lagged behind the capital, although they did catch up a little at the end of 2015.

The most affordable county is Longford where it takes just 5.9% of after-tax income to fund a mortgage, followed by Leitrim and Roscommon (6.6%) and Cavan (7.9%).

At the other end of the affordability scale, Wicklow and Kildare rival near neighbour Dublin. Meath isn’t far behind, and Cork, Kilkenny and Galway are next, the EBS/DKM study shows.

A more affordable future

Average interest rates are set to slip back further to around 3.6% by April and wages are likely to continue rising.

And so the EBS/DKM Index forecasts a further easing in Dublin’s affordability rate to 20.8% by April 2016, although this is by no means set in stone.

Outside the capital, affordability may slip back slightly, but will remain very low in comparison.

Want to know more?

You can access a summarised version of the report in our handy EBS/DKM Affordability infographic, and if you want the full picture, you can download the EBS/DKM Affordability Index here.


Note: The EBS/DKM affordability index measures how much after-tax income FTBs need to pay for their mortgage - not how easy it is to raise one in the first place. The new deposit rules, brought in last February by the Central Bank require FTBs to come up with a deposit of 10% of the house value up to €220,000 and 20% of the value above that.

Thinking of applying for a mortgage?

If you need more information about applying for an EBS mortgage, check out our First Time Buyer and Next Time Buyer Guides here.

You can also use our mortgage calculator to find out how much you may be able to borrow.

The content of this blog is expressed in broad terms and is limited to general information purposes only. Readers should always seek professional advice to address issues arising in specific contexts and not seek to rely on the information in this blog which does not constitute any form of advice or recommendation by EBS d.a.c.

EBS d.a.c. neither accepts nor assumes any responsibility in relation to the contents of this blog and excludes all warranties, undertakings and representations (either expressed or implied) to the fullest extent permitted under applicable law.

EBS d.a.c. is regulated by the Central Bank of Ireland.

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