Majority of mortgage seekers hit by new lending rules

More than two-thirds of people looking to take out a mortgage have put dreams of buying a home “on the long finger” because of stricter lending rules introduced last year, according to a new survey.

The study shows 69 per cent of those who had hoped to get a mortgage now believe it is unlikely to happen in the short term, with many predicting they will need to save for more than six years for a deposit due to the introduction of the regulations.

Many respondents cited rising property prices and rents as key factors impacting their ability to save for a deposit for a home.

Publication of the new survey, which was conducted by Behaviour and Attitudes on behalf of 11 property industry organisations, coincides with the passing of the deadline for receipt of submissions by the Central Bank in its review of the much-criticised restrictions.

The rules restrict the amount that those trading up can borrow to 80 per cent of the property’s purchase price, while first-time buyers can borrow up to 90 per cent on properties valued at less than €220,000. Income multiples are restricted in both cases to 3.5 times the income.

Impact of rules

According to the survey of more than 1,000 existing homeowners and prospective buyers, 71 per cent of first-time buyers and movers are impacted by the rules.

Almost half of those respondents considering taking out a mortgage are looking to purchase a home for €300,000 or less. A further 23 per cent are seeking homes valued at between €300,000 and €400,000 with 31 per cent wanting homes costing above this.

Some 42 per cent of potential homebuyers expect they will need to borrow from family, while 52 per cent have ruled out living where they would most like to because they cannot afford to do so.

The survey findings suggest the social cost of the revised lending rules is high, with many people forced to move away from support networks and into areas that have less amenities.

The 11 organisations behind the search are: IBEC, IPAV, BPFI, SCSI, CIF, IBA, IMB, AEMA, DNG, Hooke & McDonald and Lisney.

Separately, consumer advocate Brendan Burgess suggested there is no evidence that Central Bank rules are preventing first-time buyers from getting on the housing ladder.

In his submission to the regulator’s review, Mr Burgess said there should be no fundamental change to the limits.

“Allowing a return to reckless borrowing is not in the interests of consumers. It would simply push up house prices and the size of people’s mortgages. It would not solve the problem of housing supply,” he said.

In its submission to the Central Bank, Piba, the country's largest group of financial brokers with almost 900 member firms, said both the deposit rule and income limit are too onerous.

The organisation, which is calling for consideration to be given to applying different rules for the Dublin region where property prices are considerably higher, said the loan to value (LTV) for first-time buyers should be extended to €300,000. It also wants the loan to income threshold increased to four times the gross salary.