First time buyers spending third of income on mortgage.
Couples buying their first home spend up to a third of their income on a mortgage, a survey showed today.
According to a new Affordability Index by EBS Building Society and DKM Economic Consultants average monthly repayments begin at over €1,300 and top €1,700 in some parts of Dublin.
Nationally mortgages cost on average 27% of earnings while those in the capital will be hit harder by the continued property boom spending 32% of what they make.
The figures show a 3% jump on last year.
Dara Deering, EBS head of mortgages, said: “First time buyers make up a very important segment of the overall mortgage market and are expected to contribute €8.5bn to the market this year.
“With rising property prices and interest rates, affordability is the key issue for many first time buyers.”
Ms Deering also warned that house price growth is impacting on affordability and said EBS expected to see stronger than forecasted growth this year.
She said: “Future affordability should be a key factor in the choice of a mortgage and lenders need to take a responsible approach to affordability and encourage consumers to consider the impact of possible interest rate rises in the future.”
EBS financiers noted mortgage rates have been on an upward path since December last year with further increases in the pipeline over the remainder of the year.
And they said the Index demonstrates the adverse impact on net mortgage repayments, which will be particularly difficult for first-time buyer couples with every 0.25% increase in rates resulting in a monthly €14 rise or €168 a year for every €100,000 borrowed.
Annette Hughes, director of DKM Economic Consultants, said the Index can be seen as an indication of a couple’s mortgage-paying commitments in the early years, each on average earnings.
“Affordability is the most important barometer as to whether the property market is reaching saturation point. The general consensus is that we will see further interest rate increases over the remainder of 2006,” she said.
“While the amount of any individual increase may not impact significantly on borrowers, combined increases in mortgage rates over the next 18 months could have a significant impact on housing affordability.”
The EBS said it expects 47,000 first time buyers will take out a mortgage this year with the average price nationally at the moment at €292,000 and €388,000 in Dublin.
Source: Ireland Online
