Sunday 18 February 2018

Rents surge as one in six buyers gets lending exemption

Data from the Central Bank shows that the average variable mortgage rate was 3.6pc this
year, down from 4.13pc last year (Stock picture)
Data from the Central Bank shows that the average variable mortgage rate was 3.6pc this year, down from 4.13pc last year (Stock picture)
Charlie Weston

Charlie Weston

One in six home buyers is getting an exemption to strict Central Bank mortgage limits which were supposed to cool the property market.

From almost 11,000 loans drawn down by home buyers in the first half of the year, some 1,744 borrowers got an exemption.

This works out at 16pc of borrowers, or one in six who managed to get a mortgage, being exempted from the rules.

The Central Bank sets out that first- and second-time buyers have to have big deposits when buying, and limit lending based on income.

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 borrowings.

But close to 1,000 borrowers got an exemption based on the income limit, with a further 772 loans given out that were exempted from the deposit limit.

The findings come just weeks before the Central Bank is due to announce a review of its mortgage lending restrictions, which have proved hugely controversial.

Estate agents and mortgage brokers claim they are slowing down the home-buying market since being introduced in February 2015.

Meanwhile, Central Bank economists found the average first-time buyer has a deposit of €64,000. This represents 26pc of the value of the home. Average income for these borrowers was €66,000.

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, according to economists Christina Kinghan, Paul Lyons and Yvonne McCarthy.

Data from the Central Bank shows that the average variable mortgage rate was 3.6pc this year, down from 4.13pc last year.

The revelation comes as new figures show the pressure on those seeking a home to rent has intensified with rental costs continuing to surge.

Rents shot up by 12pc in the year to September, according to

It was the largest annual increase since Daft started recording the cost of renting back in 2002.

The average rent nationwide is now €1,077 a month, an all-time high. This is almost €130 more than last year.

In the period between July to September, rental costs were up 4pc, which means the annual rate of rental inflation in Ireland is now 11.7pc.

The rate of increase is just as severe outside Dublin as it is in the capital, according to author of the report and Trinity College Dublin economist Ronan Lyons.

The annual rise in Dublin was 12.1pc, with a rise of 11pc outside the capital.

Rents are frozen for two years for those who have a lease, but for new lettings the costs are spiralling.

Dr Lyons said: "This is having a disastrous effect on social cohesion as well as on Irish competitiveness."

The latest surge in rental costs adds to the pressure on Housing Minister Simon Coveney, who has committed to encouraging a surge in home-building.

Separate figures showed how local authorities provided an additional 9,081 new homes last year, an increase from 3,820 in 2014.

The 'Performance Indicators' report from the National Oversight and Audit Commission found that 42pc of these new homes were built or purchased by councils.

But it notes that Galway City Council did not build any new homes in 2015.

It also found that one in 33 council units was vacant at the end of last year, which was a slight reduction on 2014.

Irish Independent

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