A first-time buyer or mortgage applicant now requires significantly higher income to purchase a home compared to a decade ago, according to the Banking & Payments Federation Ireland's (BPFI) latest mortgage market profile report for the second half of 2021.
The median household income of first-time buyers increased €6,000 over the prior two years, from €71,000 to €77,000, while the median income of first-time buyers purchasing new properties in 2021 was almost €87,000, nearly €16,000 more than that of those buying existing homes.
That compares to median household income of €56,659 in 2021, according to CSO figures, with just 13% of first-time buyer mortgages and 7% of mover mortgages financing new properties being drawn down by customers with incomes of less than €60,000.
In 2005, 51% of first-time buyers and 28% of mover-purchasers that attained mortgages for new properties earned a gross income lower than €60,000. The proportion of first-time buyers of existing homes earning less than €60,000 has fallen from 44% to 34% since 2005.
Conversely, the share of first-time buyers with incomes over €80,000 has doubled in that time to 39%, with such households in the six largest counties (Dublin, Cork, Galway, Kildare, Meath and Wicklow) accouting for 31% of existing FTB mortgages, up from 25% in 2019.
In Association with
Brian Hayes, CEO of the BPFI, noted the end of mortgage interest relief in 2012 and the Central Banks introduction of loan-to-value (LTV) and loan-to-income (LTI) restrictions in 2015 in changing the market and requiring mortgage applicants to earn more.
"The median LTI for FTBs fell from 4.5 in 2008 to 2.7 in 2013, according to the Central Bank of Ireland, before rising to 3.2 by 2017. This essentially means that new mortgage customers need higher incomes than in the past," Hayes said.
Dublin borrowers represented 30-32% of FTB mortgages on properties in Meath, Kildare and Wicklow, as well as 17-24% of mover purchase mortgages on properties in those counties, bucking the trend of applicants buying in their home county.
The report attributes this to higher incomes in Dublin than in other counties in addition to the fact that home movers from Dublin may also benefit from higher-value collateral.
Other key regional findings include the fact that Wicklow has the highest median basic incomes, monthly repayments, loan values and property values, and 23% of mortgages in Limerick were secured on new properties -- the lowest share in the country.
About 37% of FTB and 24% of mover-purchase mortgages in Dublin were for terraced houses – the only region in the country where this dwelling type had a substantial share. The median repayment on FTB mortgages for existing properties in the west was the lowest in Ireland at €687.
The south and mid west have the lowest median mover purchase loans in the country at €194,500, and self-builds accounted for 78% of new properties financed by home mortgages in those regions.
Overall, the market recovered strongly in 2021, with drawdown volumes rising 22.1% year-on-year to their highest level since 2009 at 43,494, and FTBs accounting for 22,901 -- the most since 2007.
The average drawdown reached record levels in the FTB new and mover existing segments in 2021, while the average mover loan on new properties was only about €4,000 lower than in 2008, the BPFI said.
The value of the average mortgage was €263,476 in the first quarter of the year, almost €18,000 more than during the same period in 2021, and just off the €268,220 figure recorded in the first quarter of 2008.
(Pic: Getty Images)
