First-time buyers 30 and under draw down less than 25% of new mortgages

First-time buyers aged 30 or under accounted for less than a quarter of Irish mortgage drawdowns in the first half of this year, down from a 60 per cent share of the market in 2004, according to a new report from Banking & Payments Federation Ireland (BPFI).

Its release comes as the Central Bank is set to outline on Thursday whether banks can participate in the Government's proposed shared-equity housing scheme to help first-time buyers.

The regulator will also publish the outcome of the annual review of its mortgage-lending rules. However, little change is expected as the Central Bank continues a broad assessment of the lending restrictions framework introduced in 2015 to avoid a repeat of the pre-2008 crash domestic housing bubble.

The BPFI report shows that borrowers aged 35 and over now make up the greatest share of mortgage drawdowns, at 39 per cent during the first half of this year, up from 35 per cent for 2020 as a whole and 17 per cent in 2008.

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“A number of factors may be driving the ageing of home buyers but the major life events that have prompted household formation, especially marriage and having children, are occurring later in life,” the BPFI report said.

The average age of mothers at birth rose from 31.3 years in 2009 to 33.1 in 2019, according to the Central Statistics Office (CSO). Meanwhile, 19 per cent of marriage partners were under 30 years of age in 2020, compared with 35 per cent in 2010 and 53 per cent in 2000.

Some commentators, including senior executives at housebuilders Cairn Homes and Glenveagh Properties, have argued that the Central Bank’s mortgage lending restrictions, particularly around income limits, have contributed to the rising age of first-time buyers. The rules limit most new home loans to no more than 3½ times household income.

Shared-equity initiative

The Government set aside €75 million in Budget 2021 for its planned shared-equity initiative for first-time buyers struggling to come up with a deposit to satisfy the Central Bank’s loan-to-value mortgage rules.

The plan involves the State paying for up to 30 per cent of the cost of new homes in return for a stake in the property, with the banks also being involved in underwriting part of the scheme.

However, the regulator has been examining whether that would leave banks in breach of the current mortgage rules.

In a letter to the Oireachtas housing committee last year, the Central Bank expressed reservations about the overall scheme, noting it could be inflationary and may encourage participants to take on too much debt. Irish house price inflation was running at 12.4 per cent as of September, marking an 11th straight month of acceleration, according to figures released by the CSO last week.

A spokesman for the Central Bank declined to comment on the regulator’s views on banks participating in the shared-equity scheme ahead of an announcement on Thursday.