Deposit rules prompt savings surge among young people
Published 16/03/2016 | 02:30
The need for big deposits to get a mortgage has prompted a surge in the number of younger people saving, new research shows.
The latest savings index, which measures attitudes to saving, was static in February. But there was a surge in the number who feel official policies are prompting them to save, according to the Nationwide Savings Index.
Central Bank rules mean deposits of up to 20pc of the value of the property are needed to secure a mortgage. Deposits of €51,000 on average are now being used by those approved for mortgages in Dublin, according to figures from the Irish Banking and Payments Federation.
The index that measures the savings environment has risen by almost a third since the end of 2015, according to savings bank Nationwide UK (Ireland), which gets the Economic and Social Research Institute to compile the figures.
The savings environment aspect of the index rose to 131 points in February, up from 123 in the previous month.
This was the highest reading for the index since November 2011. This year alone the savings environment part of the index had shot up by 30pc, Nationwide and the ESRI said.
The ongoing deposit requirement imposed by the Central Bank to qualify for a mortgage, and the cut to the universal social change, are prompting people to save more.
Managing director of Nationwide UK (Ireland) Brendan Synnott said many younger people were saving furiously for a deposit for a property.
"We have the impact of the Central Bank rules on mortgages, requiring most buyers to have a 20pc deposit for a new home.
"This is something that younger people in particular will feel is encouraging them to save, even if they have misgivings about the policy."
First-time buyers need a deposit of 10pc for amounts borrowed up to €220,000, with 20pc needed over that amount. They are also limited to borrowing only three-and-a-half times their incomes.
Those saving for a deposit are earning little or nothing in interest as banks keep cutting interest rates.