Mortgage affordability reaches '96 levels for first-time buyers
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Friday April 10 2009
REPAYMENTS on mortgages for first-time buyers are set to fall to just 15pc of disposable income, despite take-home pay being sharply reduced by the measures introduced in Tuesday's crisis Budget, AIB economists said.
However, improved affordability may not be sufficient to outweigh the blow to consumer sentiment after the hit to incomes from the Budget.
Continued falls in house prices and a string of cuts in mortgage rates for those on trackers and standard variable rates have made property more affordable for new buyers, economist John Beggs of AIB said in a briefing note.
New buyers are also benefiting from the hike in mortgage interest relief which took effect from the start of the year. This applies for seven years.
Lose
In contrast, those who have had a mortgage for more than seven years are set to lose out from next month when mortgage interest relief will end.
Mr Beggs said house prices have fallen by 23pc from their peak in February 2008, taking them back to 2004 levels. Some housing developments have had cuts of between 30pc and 40pc.
He said he expected house price to continue to decline this year and next year.
All of this means that first-time buyers have to put aside just 15pc of their disposable income for mortgage repayments.
This is based on a 92pc mortgage, over 30 years for a couple earning a combined income of €60,000.
Mr Beggs said the fact that it cost new buyers just 15pc of their income to meet monthly mortgage repayments makes houses the most affordable they have been since 1996.
At the height of the housing boom in 2006, first-time buyers were having to spend almost a third of their income on monthly mortgage repayments.
- Charlie Weston Personal Finance Editor
