First-time buyers hold their fire on home loans
POTENTIAL first-time buyers are delaying entering the housing market in the hope of improved conditions on three fronts.
Falling house prices and uncertainty over interest rates have convinced many buyers to hold off for now.
But property experts insisted yesterday there were three reasons for optimism:
l The prospect of changes to stamp duty or mortgage interest relief in next week's Budget;
l Predictions that interest rates might actually be cut next year after a succession of rises;
l Increased competition among banks for mortgage business, which could see individual banks cutting their own rates.
Meanwhile, the decision of first-time buyers to defer purchases has seen a boom in the rental market, with rents rising to an all-time average high of €1,400 a month nationwide.
New figures yesterday showed just 7,800 new buyers took out a home loan between July and September, a 21pc decline on the numbers entering the market compared with the same period last year.
A total of €1.9bn in mortgages were approved for first-time buyers between July and September, a fall of €350m from the amount taken out in the same period in 2006, the figures from the Irish Banking Federation showed.
Some economists have predicted that the next move in European Central Bank rates will be a cut, a development that has convinced some new buyers to keep renting.
On Monday, the European Central Bank's vice-president said the appreciation of the euro was negating the need to raise interest rates.
Clued-in potential first-time buyers are also holding out to see if banks will further cut their rates in a bid to get the mortgage market back up and running.
Last week, Halifax Bank and Bank of Ireland cut their rates in an aggressive bid to snap up business.
Yesterday, IIB Homeloans told mortgage brokers it was cutting its fixed rates for residential customers and investors.
Some first-time buyers are holding out in the hope that there will be further cuts in property prices, according to banking sources.
Figures last week showed that houses have now fallen by almost 5pc in value in the past year.
So far developers have been resisting major cuts in the prices of new homes, despite repeated calls for price reductions.
A report yesterday from property website Daft.ie indicates that average residential rents have increased by 6.6pc in the past 12 months, with the average monthly rent at an all-time high of more than €1,400.
The report shows the rent for a one-bedroomed dwelling ranges from €1,135 in Dublin city centre (Dublin 1) to €770 in Cork city. Rents for three-bedroomed houses range from €2,017 in Dublin city centre to €1,164 in Cork city.
Daft said this had led to a scenario in certain areas in Dublin and Limerick, where the cost of buying a property is the same as the cost of renting one.
However, Daft said that the trend of increasing rents may not continue, as the rate of growth has slowed to single digits and the supply of rental property has never been higher.
Some of the slack in the mortgage market has been taken up by people switching mortgages to get a better deal from their lender. Switching now accounts for 17.4pc of all new lending.
- Charlie Weston Personal Finance Editor
