The expert warns first-time buyers of the double whammy of upcoming price hikes in 2023

Another grueling year ahead for first-time buyers – with house prices continuing to rise and mortgage rates rising.

So says a leading real estate expert who expects the European Central Bank to introduce further interest rate hikes in 2023 to curb spiraling inflation.

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Liam O’Connor, head of sales at Irish Mortgage Corporation, said those trying to get up the property ladder will feel the impact the hardest.

He said: “As we look to the Irish housing market for 2023, the current imbalance between demand and supply will remain.

“It is likely that first-time home buyers will be hit the hardest, given this cohort’s propensity to buy a new home.

“Housing completions are falling short of government targets and, with construction inflation continuing to rise, housing starts are unlikely to pick up anytime soon to meet demand.

“We certainly don’t see any reductions in real estate prices in the coming year, further increases, albeit marginal ones, are more likely.”

In December, the ECB announced its fourth rate hike of the year, a move that has hit hundreds of thousands of mortgage holders.

The policy rate rose by 0.5 percentage points to 2.50 percent and the deposit rate by the same amount to 2 percent.

It is also likely that the ECB will hike rates again at its next meeting in February, although the hike may be smaller.

However, Mr O’Connor said most Irish buyers and mortgage holders can take the hit.

He said: “Even taking into account the recent ECB interest rate hikes and the concomitant increase in fixed and floating rate product prices, we don’t have major affordability/repayability concerns.

“Lenders operate under very prudent lending rules, while the central bank’s macroprudential rules also serve as a backstop.

“Finally, even with a further 2 percent increase, in many cases mortgage repayments are still lower than the rents paid by our customers.”

However, the broker warned that all mortgage holders should look for the best value.

Mr O’Connor warned: “Unfortunately, there will be further rate hikes in 2023.

“As a result, hiring a mortgage broker is now even more important because we have access to the entire market, which ensures people are getting the best product available that best suits their individual needs.

“In addition, there are around 320,000 adjustable rate mortgages (including trackers) in Ireland.

“With ECB rates now at 2.5% and expected to rise further, reviewing your existing mortgage and considering fixing it for a period of time with either your existing lender or a new one is a must .”

It comes after a new report found homes are also becoming less affordable.

Figures from myhome have revealed that the average home price of €370,000 means the buyer is paying 7.7 times the average wage of €48,000 a year – the highest since 2009.

The report’s author, Conall MacCoille, chief economist at Davy, suggested that any further major hikes in mortgage rates, such as those seen in the UK, could mean Ireland could follow the UK as prices fall.