Monday 11 December 2017

New home buyers are using big deposits to buy properties

(Stock photo)
(Stock photo)
Charlie Weston

Charlie Weston

New home buyers are using big deposits to buy properties, a new research shows.

The findings come just weeks before of the Central Bank is due to announce a review of its mortgage lending restrictions.

These rules set out that first and second-time buyers have to have big deposits when buying, and limit lending based on income.

Now economists working for the Central Bank have looked at most mortgages issued this year and found that the average first-time buyer has a deposit of €64,000.

This represents 26pc of the value of the home, new research carried out by Central Bank economists shows.

Average income for these borrowers was €66,000.

Small numbers of borrowers can get exemptions from the limits, but these tend to be Dublin-based, with high income.

When those getting an exemption are excluded, the average deposit size for a first-time buyer works out at 21pc of the property’s value, economists Christina Kinghan, Paul Lyons and Yvonne McCarthy found.

The findings come ahead of a review of Central Bank lending restrictions, the outcome of which is expected to be announced before the end of this month.

The lending limits have proved hugely controversial, with estate agents and mortgage brokers claiming they are slowing down the home-buying market. They were introduced in February 2015.

The Government’s new help-to-buy scheme is seen as an attempt to circumvent the rules.

Under the regulations first-time buyers can borrow with a deposit of at least 10pc for the first €220,000, and need a 20pc deposit for all amounts over this. They are limited to borrowing only three and a half times their income.

Second-time buyers need a deposit of at least 20pc, and have the same income limit on borrowing. There are some exemptions.

The average second-time buyers have equity of €170,000 when moving home, the research shows.

Those not getting an exemption have equity of 34pc on average when moving.

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