16 Aug 2022

Borrowers now need higher incomes to buy a house than in Celtic Tiger era

Borrowers now need higher incomes to buy a house than in Celtic Tiger era

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House prices have hit Celtic Tiger levels in Ireland with new mortgage customers now needing higher incomes than ever before to buy a house. 

The latest Mortgage Market Profile Report, published by Banking & Payments Federation Ireland (BPFI) shows that new mortgage customers now require significantly higher incomes to purchase a home even when compared to the peak more than a decade ago.

The report for H2 2021, the second in the BPFI series, looks at who is taking out home loans, what types of loans are they taking out, the types of properties involved and how borrowers, loans and properties differ around the country.

The median total household income of first time buyer borrowers increased from €71,000 to €77,000 between 2019 and 2021.
Looking back to 2005 and focusing on mortgages financing new properties, the report shows that 51% of first time buyer mortgages and 28% of mover purchase mortgages had incomes up to €60,000 in 2005, compared with only 13% and 7%, respectively, last year.

Commenting on the contributing factors and the changes in the mortgage market over the last decade, Brian Hayes, Chief Executive, BPFI said: “With average house prices and loans returning to levels last seen in 2008 our latest Mortgage Market Profile report shows that new mortgage customers now need higher incomes than in the past to purchase a home.”

"It's important to note however that the mortgage market is very different now. Mortgage interest relief was available on qualifying home loans drawn down between 2004 and 2012 and played a key role in reducing home mortgage costs. In 2008 alone, home buyers benefited from almost €705 million.

"Additionally in 2015, the Central Bank of Ireland introduced limits on the loan-to-value and loan-to-income (LTI) ratios of new mortgages. The median LTI for first time buyers 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," Mr Hayes said. 

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