Changes to Central Bank mortgage lending rules have seen house prices increase by up to €20,000, a new report has found.
In 2023, the Central Bank loosened lending rules to allow first-time-buyers to borrow four times their income, up from the previous cap of 3.5 times their earnings that was introduced in 2015.
The latest report from MyHome.ie and Bank of Ireland has found that asking prices for houses nationwide went up by seven per cent over the last year. This has been blamed on a lack of supply driving intense competition in the market, and the impact of looser borrowing limits.
Report author Conall MacCoille, chief economist at Bank of Ireland, said: "One in six properties is sold by 20 per cent or more over asking price, indicating competition for homes remains fierce. Another factor at play is loosening of the Central Bank mortgage lending rules."
The typical first-time buyer borrows 3.4 times their income in 2024, up from 3.2 times their income in 2022. MacCoille said this change has pushed up house prices by €15,000 to €20,000.
He added: "That said, the process of rising leverage may be coming to an end. The proportion of first-time buyers taking out a mortgage with a 3.5-to-4-times loan-to-income multiple is now steady, at just under 50%. ‘If so, Irish house price inflation is more likely to return to mid-single digit territory."
Outside Dublin, asking prices rose 7.9 per cent, while rates in the capital were up 5.1 per cent, the MyHome report, compiled in association with Bank of Ireland, found.
It said demand for properties is still a notable feature of the market, with the typical transaction being settled for 7.5 per cent above the asking price.
This trend has been driven by factors including significant increases in the volume and value of mortgage approvals and the loosening of mortgage lending rules.
The median asking price nationally was €395,000 in the second quarter of the year. In Dublin it was €495,000 and in the rest of the country it was €340,000. Asking prices rose by 2.2% in Dublin and by 5.4% in the rest of the country.
Joanne Geary, managing director of MyHome, said it is "promising" that the threat of EU-US tariffs has not had a major negative effect on the market to date. However, she noted that the volatile geopolitical climate is "particularly unhelpful for the economy".
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