Sunday 25 February 2018

First-time buyers turning to their parents for thousands of euro for house deposits

First-time buyers need a deposit of 10pc for amounts borrowed up to €220,000, with 20pc needed over that amount. They are also limited to borrowing only three-and-a-half times their incomes. Photo: Reuters
First-time buyers need a deposit of 10pc for amounts borrowed up to €220,000, with 20pc needed over that amount. They are also limited to borrowing only three-and-a-half times their incomes. Photo: Reuters

Charlie Weston Personal Finance Editor

Huge numbers of first-time buyers are using the “bank of mum and dad” to get a deposit together.

New figures show one in five new buyers is getting an inheritance to help them put the funds together for a down payment.

The average amount gifted to buyers is around €10,000, according to new research from the Central Bank.

Economists at the Central Bank found that the amount handed over by parents and other relations tends to be around half of the funds needed for a deposit.

That’s broadly in-line with most other European households. 

Up the start of this year rules introduced by the Central Bank required first-time buyers to have a deposit of 10pc for amounts borrowed up to €220,000, and a 20pc deposit for amounts over that figure.

According to the researchers, the average Dublin first-time buyer had a deposit of €50,000 last year.

This figure has been creeping up since the property collapse.

There was an average of €25,000 being used as a down payment in the rest of the State last year, according to the economic letter by Central Bank economists Jane Kelly and Reamonn Lydon.

However, the average of €25,000 for first-time buyers outside Dublin is well below the peak during the property boom.

In the border, midlands and western region the average deposit first-time buyers are using to secure a mortgage and a home is less than €20,000, the lowest of four different regions.

In Dublin, down payments needed by first-time buyers have been rising steadily since 2012, reaching a median level of €50,000 in 2016.

The Central Bank lending rules were eased for first-time buyers at the start of the year. They can now get mortgage approval with a 10pc deposit.

Despite the controversy over impact of the lending rules on new buyers, the economic letter found that the average deposit in this country was at the lower end of the range relative to many other European countries up to last year. 

Savings and inheritance patterns are remarkably similar across most countries, they found.

One third of those between the ages of 26 and 40 who are renting say they are saving to buy a home, according to data cited by the economists.

The median amount saved for house purchase was €20,000 in the 2013 to 2014 period, the economic letter states.

First-time buyers have huge difficulties getting on the housing ladder, due to strict lending rules, but also because there are so few houses being built.

The Housing Agency estimates that there is a need for 81,000 homes between 2016 and 2012.

This figure excludes one-off houses, which is up to 6,000 units a year.

Goodbody Stockbrokers economist Dermot O’Leary called on the Government to increase housing density and height limits to help meet demand.

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