Borrowers now need higher incomes to buy homes than they did during the boom era


Borrowers now need higher incomes to qualify for a mortgage than they did during the Celtic Tigers housing boom.

The typical household income of first-time buyers has risen to 77,000 euros per year and is thus significantly higher than in the years of the real estate bubble.

In 2005, half of first-time home buyers had an income of €60,000, according to the Banking and Payments Federation Ireland’s latest Mortgage Market Profile Report.

Property prices are now within touching distance of levels seen during the Celtic Tiger property craze.

Central bank regulations on lending and the lack of mortgage interest relief have meant that borrowers today need higher incomes than they did in the housing bubble years to qualify for a mortgage.

The typical or median income of first-time borrowers is now
$6,000 more than the typical borrower needs to qualify for a mortgage in 2019.

In 2005, more than half of the new borrowers buying new homes had an income of 60,000 euros.

Almost a third of move buyers had this income.

In contrast, only 13 percent of new buyers had a household income of 60,000 euros last year.

The report also shows that first-time borrowers are being forced into higher debt levels than during the housing bubble.

The average new home buyer is now taking out a mortgage of €254,000.

This compares to average borrowing of €237,000 in 2008, the peak of the real estate boom.

Movers are now taking out €285,000 in mortgages, compared to an average home loan of €273,000 in 2008.

The proportion of first-time mortgage buyers with incomes over €80,000 almost doubled between 2005 and 2021 to 39 percent for those buying pre-owned homes.

Wicklow had the highest median household income in the state for first-time buyers buying or constructing a new home.

A new buyer of a new property in Wicklow would typically have a household income of €100,000.

Brian Hayes, Chief Executive of the Banking and Payments Federation, said: “As average home prices and loans have returned to levels last seen in 2008, our latest Mortgage Market Profile report shows that new mortgage buyers now require higher incomes than in the past to… to buy a house.”

But he stressed that the mortgage market today is very different than it was more than a decade ago.

“The mortgage rate rebate was available on qualifying home loans taken out between 2004 and 2012 and played a key role in reducing home mortgage costs.”

In 2008 alone, homebuyers benefited from nearly €705 million in mortgage interest relief – a tax break on the interest paid on a mortgage in a tax year.

And the credit limits introduced by the central bank in 2015 restrict borrowing based on income. In most cases, borrowers are limited to borrowing three and a half times their income.

First-time buyers in 2008 typically borrowed four and a half times their income.

Mr Hayes said: “This essentially means that new mortgage customers will need higher income levels than in the past.”

The report also shows that more borrowers are buying or building homes in the counties they live in. However, this is not the case for Dublin borrowers who often buy in the commuter belt boroughs of Meath, Kildare and Wicklow.

This is due to higher incomes in Dublin than other counties and the fact that Dublin home seekers can also benefit from better security. Borrowers now need higher incomes to buy homes than they did during the boom era

Fry Electronics Team

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