Friday 24 February 2017

Four out of 10 will borrow from their family to secure mortgage deposit

Charlie Weston

Charlie Weston

Those yet to start saving to buy a home expect it to take six years to get the money together for a deposit. Stock Image: Aidan Crawley/Bloomberg
Those yet to start saving to buy a home expect it to take six years to get the money together for a deposit. Stock Image: Aidan Crawley/Bloomberg

A majority of first-time buyers and movers say they are being impacted by the mortgage restrictions introduced by the Central Bank.

New market research shows that seven out of 10 new buyers and movers say they are being hit by the controversial rules, the vast majority negatively.

And four out of 10 will have to borrow from family and friends to get a deposit together, the survey, seen by the Irish Independent, shows.

Those yet to start saving to buy a home expect it to take six years to get the money together for a deposit.

The lending limits have proved hugely controversial, with claims they are making it more difficult for young millennials in particular to buy a home.

The survey was commissioned by the Irish Brokers Association, the Banking and Payments Federation, Ibec's Property Industry Ireland, the Society of Chartered Surveyors, the Construction Industry Federation, and estate agencies including DNG and others.

Read more: An average of 3,274 mortgages are being approved on a monthly basis

It was conducted by Behaviour and Attitudes, among 1,072 potential home buyers - those in the process or those intending to buy.

It will form the basis of individual submissions by the different groups to the Central Bank's review of the rules.

The closing date for submissions on a review of the lending limits is today, but Central Bank Governor Philip Lane said submissions would need to be supported by "high evidential threshold" to convince him to alter the rules.

The Behaviour and Attitudes survey found:

  • That 42pc say they will have to borrow from family to fund the deposit. A quarter of those intending to buy have already factored in a gift to help them buy.
  • The survey found 52pc have excluded the area where they want to live as they cannot afford to buy there.
  • Some 35pc of those surveyed spontaneously referenced deposit size as a negative, with an equal number referring to high prices.
  • Six out of 10 potential first-time buyers are paying high rents while trying to save for a deposit.

The researchers comment: "The social cost is high, with many moving away from family networks and to areas of lower amenity or infrastructural inappropriateness (poorer transport, childcare facilities, schools, roads, and further from work)."

Recent Central Bank research has shown that the average first-time buyer is coming up with a deposit of €61,000 to purchase a home.

This is up from an average of €56,000 before the lending limits kicked in.

Raising a deposit of this size is seen as beyond the capacity of most ordinary workers.

Critics have claimed that only those with rich parents are able to buy, something the survey seems to support as four out of 10 are using funds from their family to get a deposit together.

However, Prof Lane has previously said the restrictions could be further tightened instead of loosened.

A separate submission from consumer advocate Brendan Burgess supports the restrictions.

Mr Burgess said there was no evidence the rules were preventing first-time buyers getting on the housing ladder.

He said the fact that lenders were allowed to make exceptions in up to 15pc of cases had worked very well.

More than 30 submissions have been received by the Central Bank.

Irish Independent

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