Rising house prices and pressure on the cost of living are forcing buyers to borrow more to secure a home while their purchasing power is exhausted.
According to figures from the Banking and Payments Federation, the average first-time buyer mortgage in June was €263,000.
That’s an increase of $30,000 compared to what a typical first-time buyer rented a year ago.
And it was the highest level since the data series began in 2003, the banks said.
The previous record was €251,831 at the beginning of 2008.
Separate figures have shown that those looking for an apartment have 27,000 euros less purchasing power than a year ago.
According to Daftmortgages.ie, the typical mortgage seeker now has €11,000 less in savings for a deposit than mortgage seekers in the same position a year ago. They plan to make up the difference by taking out more loans, the broker found.
The reduced spending power of these home seekers could be due to spending picking up again after the Covid-19 pandemic eased restrictions
New shoppers have reduced spending power as their savings have been lower due to a resurgence in spending following the lifting of Covid-19 pandemic restrictions and the rising cost of living.
This comes as asking prices for properties increased by €30,000 in the three months to June compared to the same quarter last year.
Daftmortgages.ie said the fall in savings and the fall in household expenses mean home seekers are now spending €27,000 less on a home than a year ago, or a 9 per cent reduction.
Mortgage seekers have an average of €11,000 less in savings per deposit than they did a year ago.
Larger loans will be required to make up the shortfall. This will result in a €59 increase in her monthly mortgage repayments, increasing her repayments from €872 to €931 per month.
Over a year, first-time buyer couples will spend €708 more per year on their mortgage payments than a typical new buyer spent last year.
General Manager at Daftmortgages.ie Paul Monahan said: “It could be argued that the 15 per cent reduced savings and therefore 9 per cent reduced purchasing power of these home seekers could be due to a rebound in spending following the lifting of Covid-19 pandemic restrictions or it could be because these customers are coming under pressure from the rising cost of living.”
In contrast, the number of first-time buyers who were approved for a mortgage in June fell slightly to 2,675.
That compares to 2,755 in the same month last year, according to the Banking and Payments Federation.
However, the number of mortgage lending providers switching continues to rise sharply.
Last month, the number of churners rose 153 percent to 1,789, the banks said.
Almost 6,000 new buyers took out a mortgage between April and June.
This is an increase of 1,099 compared to the same period last year, an increase of 22.5 percent.
A total of 11,985 new home loans worth EUR 3.13 billion were taken out by borrowers in the second quarter of this year.
This represents an increase of 24.5 percent in volume and 40.6 percent in value over the corresponding second quarter of last year.
First-time buyers remained the largest single segment, accounting for half of the market. Buoyed by increased switching activity, mortgage approvals reached 55,467 in the 12 months ended June 2022.
This is the highest level since the Bankers Association began data series in 2011.
The banks announced that a total of 5,960 mortgages were approved in June this year.
They said 2,675 was for first-time buyers.
Meanwhile, mover buyers accounted for 1,185 home loans.
Mortgages approved in June were valued at €1.66 billion – of which €737 million was for first-time buyers and €401 million for move-out buyers, the lenders said.
Meanwhile, an analysis of the Home Price Register shows that home sales prices rose 14 percent in the second quarter of this year compared to the same period last year.
The average price for a house in Ireland is €285,000.
According to Valuemyhome, that is 35,000 euros more than in the same period last year.
Since the first three months of last year, the Irish housing market has had six consecutive quarters of price inflation.
The length of this price rise now matches that of 2006-2007, the absolute peak of the Celtic Tiger boom years.
https://www.independent.ie/business/personal-finance/property-mortgages/first-time-buyers-forced-30000-more-into-debt-in-just-twelve-months-41866833.html First-time buyers have incurred 30,000 euros more debt in just twelve months