First-time buyers need incomes of almost €80,000, banking body says

New report highlights steep income metrics required to purchase a home in Republic

New mortgage customers now require incomes of just under €80,000 in many cases to purchase a home in the Republic, according to new data.

According to a report from the Banking and Payments Federation Ireland (BPFI), the median or typical income of first-time buyers (FTBs) here rose from €71,000 to €77,000 between 2019 and 2021.

Back in 2005, 51 per cent of FTB mortgages and 28 per cent of mover purchase mortgages had incomes up to €60,000, the BPFI said. This compares with only 13 and 7 per cent respectively last year.

"With average house prices and loans returning to levels last seen in 2008, our latest mortgage market profile report shows that new mortgage customers now need higher incomes than in the past to purchase a home," BPFI chief executive Brian Hayes said.

“It’s important to note, however, that the mortgage market is very different now. Mortgage interest relief was available on qualifying home loans drawn down between 2004 and 2012 and played a key role in reducing home mortgage costs,” he said.

Loan ratios

Mr Hayes also noted that since 2015 the Central Bank’s strict loan-to-value and loan-to-income ratios have applied to most mortgages.

The median loan-to-income for FTBs fell from 4.5 in 2008 to 2.7 in 2013, according to Central Bank data, before rising to 3.2 by 2017.

“This essentially means that new mortgage customers need higher incomes than in the past,” Mr Hayes said.

The BPFI's report also examined the regional spread of mortgages. Dublin remains on top with 30.6 per cent of home purchase mortgages in the 12 months ending December 2021. Outside Dublin, Cork is the largest single market with 11.4 per cent of mortgages, followed by Galway and Limerick with 4.7 per cent and 3.7 per cent each.

Most home mortgage customers (82.5 per cent) build or buy properties in the county where they live (based on the main borrower), the report found.

However, the importance of non-resident mortgaged buyers varied across the country, with the Dublin commuter belt a notable exception. Dublin-based borrowers represented 30-32 per cent of FTB mortgages on properties in Meath, Kildare and Wicklow, as well as 17-24 per cent of mover purchase mortgages on properties in those counties.

Collateral values

The report attributed this phenomenon to higher incomes in Dublin than in other counties in addition to the fact that home movers from Dublin may also benefit from higher-value collateral.

For FTBs buying or building new properties, Wicklow had the country’s highest median basic household incomes, monthly repayments (excluding self-builds), loan values and property values while only 23 per cent of home mortgages in Limerick were secured on new properties – the lowest share in the country.

At €194,500, the south and mid-west has the lowest median mover purchase loans in the country. The report also found self-builds accounted for 78 per cent of new properties financed by home mortgages in the south and mid-west region – the highest share in the country.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times

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