Tuesday 12 December 2017

Back to boom era: first-time buyers borrowing an average of over €200k

Mover-purchasers are also starting to take out higher levels of mortgage debt, with the
average loan now €248,486, up 4.4pc on the year (Stock image)
Mover-purchasers are also starting to take out higher levels of mortgage debt, with the average loan now €248,486, up 4.4pc on the year (Stock image)
Charlie Weston

Charlie Weston

Surging house prices mean first-time buyers are back borrowing amounts last seen during the disastrous property boom.

The average mortgage amount being approved for first-time buyers has gone above €200,000.

This is the first time the average approval amount for new buyers has hit this level since 2009, when the property bubble started to burst.

A chronic shortage of properties and the Government's help-to-buy incentive are prompting new buyers to borrow more.

New figures from the Banking and Payments Federation show that the average mortgage approved for a first-time buyer rose to €201,928 in December.

This was up from an average of €192,928 in October, according to the banks.

The higher borrowing level comes as Central Bank rules on the size of deposits needed to get mortgage approval have been relaxed for new buyers.

The change in the rules means new buyers can get a mortgage with a 10pc deposit. Up to now they needed a 20pc deposit for amounts borrowed over €220,000. Although the rule changes did not come into effect until this year, banks appear to have been approving mortgages in December for new buyers on the basis of the relaxed rules, knowing the mortgages would not be drawn down until this year.

Debt

Davy Stockbrokers economist Conall Mac Coille said the relaxing of the Central Bank lending rules meant borrowers could take on higher levels of debt.

He said the banking figures show the average mortgage loan approval to first-time buyers was 11pc higher in December, when compared with the previous month.

"The last time Irish first-time buyers borrowed more than €200,000 on average was in 2009."

Mover-purchasers are also starting to take out higher levels of mortgage debt, with the average loan now €248,486, up 4.4pc on the year.

Mr Mac Coille said the higher amounts being approved reflected the fact there was a chronic shortage of properties to buy. Just 1pc of the housing stock, or 20,000 homes, had been listed for sale on the property website MyHome.ie, he said.

The banking figures also show that 3,144 people were approved for a mortgage in December. This was 31pc higher than the same month the year before. This took to 34,230 the total number of potential borrowers who got the green light to borrow over all of last year. Half of those approved by their lender for a home-loan were first-time buyers.

Not everyone approved for a mortgage will end up drawing it down, as many will be outbid by cash buyers and investors when trying to buy a property.

Irish Independent

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