Last week the Central Bank published its annual review of mortgage lending in Ireland for 2018. While the headline figure may have been the volume of overall lending last year, the report itself contained some nuggets on the kinds of mortgages being drawn down.
So what can putative home buyers learn from it?
You needed a 5 per cent pay rise to buy your first home last year: The average income of a first-time buyer (FTB) last year was €73,536, up by 5 per cent on the previous year, while in 2015 it was just €64,721. And if you're looking to trade up or down, you're going to need substantially more. Figures show that the average income for this cohort was €111,396 last year, suggesting an average purchase price of about €433,000. The good news for these borrowers, however, is that the average price only rose by €173 on 2017.
There are plenty of cash-rich trader-uppers/downers out there: While second-time buyers are required to stump up a deposit of 20 per cent themselves under Central Bank rules, the data shows that one in five came up with a deposit of 50 per cent or more.
It is possible to borrow 4.5 times income: If you're hamstrung by the mortgage rules which limit borrowings to 3.5 times your income, the data shows that it is possible to borrow as much as 4.5 times. Indeed the Central Bank data shows that 3.4 per cent of all loans last year, or 652 first-time buyers, managed to secure a loan worth more than 4.25 times their income last year. But it's harder for trader uppers; just 0.8 per cent of second-time buyers, or 120 borrowers, managed to borrow at this level.
Very few first-time buyers look to borrow more than 90 per cent: While banks are entitled to allow 5 per cent of first-timers to borrow more than 90 per cent of the purchase price, just 21 loans were offered on this basis last year. This could mean that banks are either loathe to lend over 90 per cent or there is simply no demand from borrowers.
Banks aren't writing enough exemptions: Remember last year when exemptions, which allow people to get around the mortgage rules, were said to have run out as early as April? Well, the Central Bank data shows that banks should have kept offering them after this date. Under the rules banks are allowed to lend up to 20 per cent of their mortgage book at LTIs (loan to income) of more than 3.5 times for first-time buyers, and 10 per cent to those trading up. However, in the end just 17 per cent of first-timers and just 7 per cent of second-time buyers drew down on a mortgage secured under such exemptions last year. And there was a similar shortfall on the LTV side. While banks may now be getting better at managing the process, they were hampered last year by applicants successfully getting two or three exemptions, and then only drawing down one, or applicants' purchasing process getting delayed and running into the following year. This shows that the exemption option is not being maximised.
Negative equity loans are happening: There may not be many of them, but 134 negative equity loans, at an average value of € 261,194, were drawn down last year. This means that if you're looking to move home, but are still in negative equity, talk to your bank – there may be restrictions, but it is possible to get a loan to allow you to carry your debt to your new home.
It's getting harder to buy on your own: Last year some 30.6 per cent of first-time buyers applying for a mortgage were single. This year it has slipped back to 28.3 per cent, as rising prices continue to make things more difficult for those buying alone. And if you're trying to trade up, it's even harder. Figures show that just 19 per cent of trader-uppers were single buyers last year.
Borrowers aren't getting older: This might surprise. The average age of a first-time buyer hasn't shifted much since 2013 – in fact it has risen from 33 in 2015 to 34 last year. And when it comes to trading up, the age is steady at 41; however, this may be a factor of restrictions on mortgage terms. Many banks won't let you borrow into retirement, and it can be unaffordable for many to borrow on terms of less than 25 years, which puts a natural age ceiling on this cohort.