5 Times Salary – Average Mortgage for First-Time Buyers in Ireland

Industry lobby group Property Industry Ireland (PII) released a report recently which showed that at the end of September 2015, first-time buyers in Ireland typically had a mortgage of around €172,000.

This figure means that first-time buyers are now, on average, having to take out a mortgage which is equivalent to 5 times the average wage in Ireland, which currently stands at just over €35,000.

These figures come despite new rules on first-time buyer mortgages which have been imposed by the Central Bank, which prevent first-time buyers from borrowing more than 3.5 times their gross salary and also require them to pay deposits of up to 20%. Part of the reason for this is that some of the mortgages included in the figures from the PII report were approved before the changes came into effect back in February 2015.

The new rules have been widely criticised by estate agents and lenders who feel that the rules are far too strict, and will dampen the demand for mortgages significantly over the coming months, as the effects of these rule changes begin to fully feed through into the market.

House prices rising, but at a slower pace

House prices in Ireland have risen consistently for almost two and a half years on an annual basis and the rise this month means that prices are now up 7.6 percent compared with 12 months ago.

This annual growth rate is substantial, but is a lot lower than some of the annual growth figures presented earlier in the year, peaking at 16.8% in March of 2015. Much of the high house price inflation around this time has been attributed to buyers rushing into the market in an attempt to avoid the introduction of the earlier mentioned rules by the Central bank, restricting mortgage lending for first-time buyers. As these rule changes bed in next year, annual house price growth is predicted to slow, as the effect of first-time buyer mortgage applications approved before the new rules were introduced influencing the numbers will no longer be applicable.

Prices still considerably lower than at their peak

Although house prices have risen consistently for almost 2 and a half years now, prices are still considerably lower than they were at their 2007 peak, before the financial crisis hit the Irish housing market severely. When we look at property prices over the country as a whole, residential house prices are still 33.5 per cent lower than they were back in 2007 and in Dublin they are 33 per cent lower than at their peak. For apartments, it’s a slightly more depressed story, with Dublin apartment prices still down over 40% from their peak.

When commenting on this years house price growth, Angela Keegan of The Irish Times-owned property website myhome.ie said “We are clearly going to see single digit growth this year and that is welcome and more or less what we predicted at the start of the year”.

Article by Adam Buller at LoansIreland.ie – Ireland’s number 1 loans comparison website. Search for a loan today or use our mortgage calculator tool.

Main image by William Murphy @ Flickr.