Young people are moving back home to save for deposit

Ken Murray: ‘Lucrative offers could cost you money'

Charlie Weston Personal Finance Editor

June 09 2015 12:04 AM

Thousands of younger people are moving back to their parents' homes in a bid to save money for a deposit for a house, a survey has found.

The belief that Ireland is likely to follow Europe by becoming a nation of renters is widespread and particularly strong among the 18- to 24-year age group, the survey of 1,000 people found. Three-quarters of people in this age group believe Ireland will become a nation of renters.

But 70pc of all age groups believe that the expectation of owning their own home is now unrealistic.

And brokers have warned people not to be sucked in by "glitzy" offers like cash back and money for paying legal fees when it comes to choosing a mortgage provider.

More than a quarter of people between the ages of 25 and 34 said they had moved back to their parents' homes to save for a deposit on a home, according to the survey commissioned by Aviva Home Insurance.

New Central Bank rules mean that anyone getting a mortgage for amounts over €220,000 has to have a deposit of 20pc of the property's value.

Most of the survey respondents cited the need for security as the main driver for their wish to own their own home.

Around four out of 10 said they wanted to be able to bequeath a property to their children.

Aviva Home Insurance's Sharon Treanor said almost half of those surveyed support the need for the 20pc deposit that has been introduced by the Central Bank.

She said people seem to feel that home ownership is less realistic than it once was and are more accepting of renting in the long-term.

Meanwhile, a deputy governor of the Central Bank told a conference yesterday that this country needs to develop a broader and deeper rental market to protect itself against future financial shocks.

Stefan Gerlach said there was a need for long-term rental leases - but he argued against the need for rent controls.

Countries like Ireland need to promote a "well-developed rental market as a genuine alternative to ownership, and an attractive investment proposition for potential landlords," he said.

And the Association of Expert Mortgage Advisers warned those taking out a mortgage not to be swayed by enticing offers.

Bank of Ireland last week said it would give 2pc of the value of mortgages being taken out with it in cash back to successful applicants. Others offer to pay the costs of conveyancing, while some lenders offer low introductory fixed rates.

But Ken Murray of the association said many of the heavily-marketed offers are often only open to a certain group of people who fit specific criteria.

"Some deals will have merit and will be suitable for people in particular circumstances. For example, if a client wants the security of a long-term fixed rate, then they might benefit from one.

"Other, apparently 'lucrative' offers, might end up costing you in the long term, such as the cost of switching to avail of a deal, or the rate you will roll off to after the initial introductory offer has expired," he said.