First time buyers forced €30,000 more into debt in just twelve months

Rising home prices and low cost of living are forcing buyers to borrow more to secure a home, while their purchasing power is eroded.

According to data from the Banking and Payments Federation, their average first-time buyer mortgage in June was €263,000.

That’s €30,000 more than a typical first-time buyer borrowed a year ago.

And it is the highest level since the data series began in 2003, Banks said.

The previous record was €251,831 in early 2008.

In separate figures it has emerged that house hunters have the power to spend €27,000 less than a year ago.

According to Daftmortgages.ie, the typical mortgage seeker now has €11,000 less savings to deposit than mortgage seekers in the same situation a year ago. The broker found that they were planning to make up the difference by borrowing more.

Less spending power for in-house hunters could result in spending bouncing back as Covid-19 pandemic restrictions are lifted

New buyers have lost their spending power as their savings plummet, as the Covid-19 pandemic lifts restrictions and the rising cost of living has led to a jump in spending.

This is in reference to a €30,000 increase in property prices in the three months to June compared to the same quarter last year.

Daftmortgages.ie said the reduction in savings and reduced household costs means house hunters now have €27,000 less to spend on a home than they did a year ago, or a decrease of 9pc.

Mortgage seekers have on average €11,000 less in savings to deposit than a year ago.

Large borrowings would be required to meet the shortfall. This would result in a €59 increase in his monthly mortgage payment, making his payment from €872 to €931 per month.

In a year, a first-time buyer couple will spend an additional €708 on their mortgage repayment per year compared to a typical new buyer last year.

General Manager of Daftmortgages.ie Paul Monahan said: “It could be argued that 15pc has reduced savings and therefore 9pc less spending power for in house hunters may be a result of bouncing back spending because Covid – 19 pandemic restrictions have been lifted or it may be because these customers are feeling the pain due to rising cost of living.”

Meanwhile, the number of buyers approved for first-time mortgages declined slightly to 2,675 in June.

This compared to 2,755 in the same month last year, according to data from the Banking and Payments Federation.

However, the number of mortgage holders switching providers continues to increase drastically.

Banks said the number of switchers increased by 153 per cent to 1,789 last month.

In the April-June period, just under 6,000 new buyers made a pledge.

This is 1,099, an increase of 22.5 percent over the corresponding period of the previous year.

A total of 11,985 new mortgages, valued at €3.13bn, were placed by borrowers during the second quarter of this year.

This represents an increase of 24.5 percent in volume and 40.6 percent in value over the corresponding second quarter of the previous year.

First-time buyers remained the single largest segment accounting for half of the market. Encouraged by increased switching activity, the number of mortgage approvals reached 55,467 in the twelve months ending June 2022.

This is the highest level recorded since the Banking Federation data series was launched in 2011.

Banks disclosed that a total of 5,960 mortgages were sanctioned in June this year.

He said 2,675 were for first time buyers.

Meanwhile, proposer buyers took 1,185 home loans.

Lenders disclosed that the mortgages approved in June were valued at €1.66bn – of which first-time buyers accounted for €737m and proposer buyers accounted for €401m.

Meanwhile, an analysis of the Property Value Register shows that home sale prices increased by 14 per cent in the second quarter of this year as compared to the same period last year.

The average price of a house in Ireland is €285,000.

According to Valuemyhome, this is €35,000 more than the same period last year.

Since the first three months of last year, the Irish housing market has charted six consecutive quarters of price inflation.

The length of this price increase now corresponds to the period from 2006 to 2007, the peak of the ‘Celtic Tiger’ boom years.