Friday 28 October 2016

Revealed: How long it takes to get a deposit for a mortgage

Published 04/10/2016 | 11:02

SURGING rents and the Central Bank lending rules mean it now takes up to four years to save for a deposit to get a mortgage for a Dublin property.

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And Dublin buyers now need up to €40,000 more in a deposit than they did two years ago to satisfy lending rules.

It now takes between one and two years longer to accumulate the down payment than it took before the Central Bank introduced its strict rules requiring buyers to have large deposits.

It takes between two-and-a-half and four years to build up a deposit for a Dublin home.

There is an extra year involved in saving enough for a deposit outside the Dublin area.

In urban areas outside Dublin it can take a year and a half to accumulate a deposit lump sum

The timeframe is under one year for rural areas, according to research by economists in the Central Bank.

Researchers found that someone buying in South Dublin now needs a down payment of €76,000. This is €41,000 more than the couple needed for this area two years ago.

In other parts of Dublin the size of the deposit has risen by between €10,000 and €22,000.

Outside Dublin, buyers need an extra €5,000 for the down payment.

Controversial lending rules mean first-time buyers have to have a deposit of more than 20pc of the value of the property for amounts borrowed over €220,000. They have to have a deposit of 10pc for borrowings up to €220,000.

There are also restrictions what they can borrow based on their income.

The new research comes ahead of the Budget which is expected to see a new tax rebate announced for buyers of new homes, something economists said would only push property prices up again.

Rising house prices are also making it more difficult for new buyers to put the funds together a sufficient deposit to satisfy lending rules.

Central Bank economists Conor Kelly and Fergal McCann wrote in the study: “We show that, relative to mid-2014, the time to save has increased in Dublin by between one and two years, and under one year in other areas.”

The study looked at how first-time buyers get a deposit together for a three-bed property, while renting a two-bed property. It considered a couple with no children.

The Central Bank is reviewing the mortgages caps it introduced in February last year.

Property industry and estate agent group have claimed the rules are too restrictive.

The Central Bank is due to announce the outcome of the review of the rules next month.

Deputy Governor Sharon Donnery said she had concerns about changing the rules. Any move must be backed up by evidence, she said.

The mortgage restrictions are aimed at preventing another property bubble, but Ms Donnery said they would be undermined by being routinely tweaked.

Strong rises in rents are sucking money from those trying to get “mortgage ready”.

Rents rose by 10pc in the year up to June, with strong rises outside the capital as well as in Dublin.

This is despite efforts by the last Government to put a two-year freeze on rises.

The monthly cost of renting is now close to €1,000 nationally, according to the Residential Tenancies Board.

In Dublin, rents are at a new higher and are now almost 4pc above the previous peak in 2007.

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