Thousands in 'serious trouble' on home loans
State report to issue first alert for young buyers on 100pc mortgages
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THE Government will for the first time admit today that tens of thousands of young people are in serious trouble with their mortgages.
A report will reveal that one-third of all new home buyers are signing 35-year 100pc mortgages - some for as much as €500,000.
Such is the level of concern over how "stretched" so many young buyers have become, the Government will issue a "health warning".
Borrowers will be warned that they should bear in mind long-term costs and the fact that interest rates can change significantly.
House prices might be coming down but new buyers, with an average age of around 30, are still being locked into mortgages of more than €500,000.
Two years ago this week, First Active became the first financial institution to offer 100pc mortgages more widely here. It - and others - had previously offered 100pc mortgages on a case-by-case basis.
With an estimated 180,000 new homes built over the past two years, up to 60,000 buyers could already have a mortgage of that type, according to the government figures.
The full scale of the mortgage debt trap is revealed in a new report on house prices published today by the Department of the Environment. It reveals:
* More than 47pc of all new house mortgages were taken out by first-time buyers aged 30.
* One-third of them are taking 100pc mortgages.
* The typical loan is now over 31-35 years.
* The average price of a new house at the start of the year was €314,087, and €375,577 for a second-hand property.
* The average price of a new house in Dublin was €419,330 (+16.1pc) and for a second-hand house was €517,865 (+8.9pc). Prices have since fallen back.
* A national inventory of residential-zoned serviced land at June 30 shows that there are more than 15,900 hectares of residentially zoned serviced land with an estimated yield of 492,000 housing units.
Despite the predicted "soft landing" for the property market, the report reveals that the value of mortgages for 2006 was 50pc higher than in 2004.
Housing Minister Batt O'Keeffe will warn today: "Borrowers need to take account of long-term costs and the fact that interest rates can change significantly."
The Department of the Environment house prices report discloses that fewer houses are now being built.
Almost 33,000 houses were built in the first five months of this year, to the end of May - an average of 1,600 per working week.
Reductions
This is far down on previous years.
The report shows that a total of 14,686 households were assisted through various housing supports.
These included 11,249 local authority or voluntary and co-operative houses, while 3,216 households benefited from affordable housing measures and a further 221 received mortgage allowances towards the purchase of their own homes.
Mr O'Keeffe said house prices had eased since the last quarter of 2006.
This was the result of reductions in affordability due to interest-rate rises and very steep price escalation in the previous 18 months in the context of strong housing demand and mortgage lending.
He claimed government moves on stamp duty and mortgage-interest relief would improve access to housing, particularly for first-time buyers, and assist balanced market growth.
"While there are indications of some easing in housing activity, the rate of output to date in 2007 remains robust, suggesting another year of high output," he said.
"Continued strength of the economy should underpin demand for housing in the future," he said.
In June, continuing the squeeze on mortgage holders, the European Central Bank hiked its basic interest rate to 4.25pc - the eighth increase in a row, meaning mortgages hit their highest level in six years.
- Treacy Hogan
