Dubliners hammered by new loan rules
The new Central Bank rules on mortgage lending, while not as harsh as expected, still came as a huge blow to many house hunters. Most of those looking to buy a home today must now get together a larger deposit than had previously been the case.
We are in a state of flux at the moment when it comes to analysing the real impact of the new rules and ultimately it is still much too early to tell.
Many people had mortgage approval from banks before the rules kicked in and they still have time to proceed with these mortgage agreements to buy a property. Hence, much of the activity we are seeing on the market now is from these people.
What has become glaringly apparent is that where you want to live in the country will be a huge factor in determining the impact of the new rules. Ultimately, first-time buyers in Dublin, particularly those on low or middle incomes, have been crucified
Under the new rules, first-time buyers still only need a 10pc deposit - as long as the house they are buying is worth no more than €220,000. Otherwise, they must have a higher deposit for the portion of the home that is worth more than €220,000.
The average asking price nationwide is now €201,000, according to the latest house price report from Daft.ie. As this is below the €220,000 limit, many first-time buyers won't be put out by the new rules. However, this is just a national average - the county averages vary hugely.
The most expensive areas in Ireland to buy three-bedroom properties are unsurprisingly all in Dublin. The average asking prices in Dublin, as well as Wicklow, are well above the national average. However, average asking prices in Cork, Galway and Limerick are below the national average.
Another concern is a change the Central Bank has made to house valuation requirements. While it has been standard practice that a house valuation has to be done in order to secure a mortgage, the Central Bank has now added a condition whereby you must have a second valuation done if the sale does not close within two months of the first valuation. Anyone who has bought or sold a house will tell you that in practice this time line is simply too tight. What this means is that buyers, who have a contractual obligation to buy a property, are ultimately financially exposed.
So what can house hunters do to ensure they can buy within the boundaries of the new rules?
First, if you have been saving for a deposit, continue to save. While you may have to alter the value of the properties you have been looking at, you don't know what the future will bring and what will happen to house prices.
Second, don't rush! All this uncertainty makes people on edge and often people can make rash decisions when they are feeling like that. Buying a house is a huge and long-term purchase. So the same deciding factors apply. Is it an area that you want to live in? Can you imagine yourself there long-term? And so on.
Third, affordability is key. It's not just up to the banks or the regulatory bodies to ascertain whether or not you can realistically afford a property. Be prudent. You're the one who will have to meet the monthly repayments which will directly impact the lifestyle you can have.
Ken Murray is director of the Association of Expert Mortgage Advisers
Sunday Indo Business