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21 Aug 2017

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According to a new study for EBS d.a.c by DKM Economic Consultants, lending activity is up for first time buyers, partially due to the softening of the Central Bank’s macroprudential rules and the Help to Buy Scheme.

5,242 mortgage applications were approved from January ’17 to July ’17, with a 19 percent year-on-year increase in approvals.

Across the country, the average first time buyer couple uses 21.2 percent of their net income to fund their mortgage. This figure is up almost 3 percent from 18.7 percent in May 2015.

Dublin market is still on the rise

The average price paid by first time buyers for a home in the capital is €336,914. Based on that figure, the average first time buyer mortgage in the capital is €269,531, assuming a 20 percent deposit or an 80 percent loan-to-value ratio.

This means that Dublin-based first time buyer couples are paying 27.4 percent of their net income to service their mortgages.

According to the EBS DKM Index, single first time buyers are using 32.2 percent of their net income to service their mortgage repayments – based on an assumption that a single first time buyer earns one and a half times the average income.

Increased applications means increasing house prices

House prices across the whole of Ireland rose by an average of 11.9 percent in the last year, mainly due to a lack of supply in the market.

The CSO’s Residential Property Price Index, which now includes all cash and mortgage based sales, showed that the rise in prices in Dublin has now spread to the rest of the country. Dublin house prices saw a growth of 11.2 percent in the year to May 2017, while the rest of the country recorded price rises of 12.8 percent in the same period.

However, there is value to be had for first time buyers. Longford, Offaly, Leitrim, Roscommon, Donegal and Cavan are the most affordable counties in Ireland, with the average house prices at less than €128,000. Likewise, couples in these areas can expect to pay 14 percent or less of their income towards their repayments.

The Central Bank rules are having an impact

The Central Bank revised its mortgage rules, effective as of January 2017, and first time buyers now need a deposit of 10 percent of the value of the property they want to purchase. The previous rule was tougher on first time buyers with a 10 percent deposit required on properties valued up to €220,000 and an additional 20 percent on the value thereafter.

The softened rules have been welcomed by first time buyers and, alongside the Help to Buy scheme, may be responsible for the increase in approvals.

The Help to Buy scheme means that first time buyers can get a tax rebate of 5 percent of the value of their new home, where the property is a new build or self build.

The most and least affordable areas in Ireland

While Dublin is one of the least affordable areas in Ireland, many counties still offer great value.
Longford, Offaly and Leitrim are the most affordable areas. In Longford, the average property price is a much more affordable €100,222, meaning that couples are paying just 9.9 percent of their net income to service their mortgage.

Likewise, 28 of the areas considered in the report have an average house price of €250,000 or less – with repayment percentages for first time buyer couples ranging from 9.9 percent to 21.6 percent in those areas.

Want to find out more about mortgage affordability?

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 first time buyers need to pay for their mortgage - not how easy it is to raise one in the first place.

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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