If there are many reasons why people might want to buy a house now – rapidly rising rents and house prices to name just two – there seem to be just as many preventing them.
"Getting a mortgage is as difficult as it has been at any time in my 30 years in the mortgage business," says broker Michael Dowling of Dowling Financial, adding that while "most people can get a mortgage – it may not be what they're looking for".
So what’s preventing people from getting on, or moving up or down, the property ladder?
1: You don’t have a deposit
Yes, help to buy, which gives a tax rebate of 5 per cent of the purchase price on a property to first-time buyers (FTBs), can help shorten the gap between your savings and a 10-20 per cent down payment. But it is restricted both to FTBs and new-builds, which may not suit everyone.
And without this, you're going to need some sizeable savings. A recent report from the Banking & Payments Federation of Ireland (BPFI) for example, showed that FTBs around the country need a typical deposit of €36,500, or €50,000 to get on the housing ladder in Dublin.
And if you’re a second-time buyer, you’re going to need as much as €140,000 in Dublin, while the median deposit required nationally is €90,000, up by a huge 12 per cent on the year.
2: You’re trading up
In days gone by, securing your second home seemed to be more straightforward. You’d sell your first house, and use the gains you made as a deposit on the next house. These days, however, having anything left over when you pay back the bank after selling your first home might still be a pipe dream. Indeed, thousands still languish in negative equity, while others may do the sums to discover they will have just a very low five-figure sum to put towards their next house.
Compounding this are the Central Bank rules, which require trader-uppers to have a deposit of 20 per cent of the purchase price – a tall order for many.
And if you’re buying from abroad, unless you have exceptionally deep pockets, you can almost forget about it. These days lenders require deposits of as much as 40 per cent of purchase price for emigrants who are looking to buy back home.
But even if you have the money it can be a challenge: putative trader-uppers are finding that agents aren’t taking their offers unless they’ve already completed a sale on their own property.
3: Your income isn't rising quickly enough
Since the introduction of Central Bank mortgage-lending rules in 2015, those without the luxury of hefty deposits are struggling to borrow enough. The rules dictate that you can borrow only 3.5 times your own/combined income, which means someone on €30,000 can borrow €105,000; someone on €50,000 can borrow €175,000; and so on.
“It’s very, very tight in Dublin, it’s very difficult, so a lot of people are struggling with that one,” says Rachel McGovern, director of financial services with Brokers Ireland.
Indeed, as prices continue to rise in Dublin and across the country, this multiple is leaving many people short of requirements. That same survey from the BPFI shows that the income levels needed to secure a mortgage are growing at a rate of about 5.4 per cent; but wages are growing at just 2 per cent.
And if you want to include a bonus in your income, Dowling suggests it will have to be paid for at least three years before the bank will even consider it.
4: The bank of Mum and Dad is closed
With rents so high many people – as they always have done – are turning to their parents for a little bit of help getting the funds together. But if you don’t have this option, it can make buying a property that bit more difficult.
And even if you do get a gift, you may still need your own savings.
“Lenders are asking for 5 per cent of the balance of funds to be made up of the customers’ own savings,” says McGovern.
And forget about trying to hide a loan from the credit union for your deposit.
"The lender will see it," says McGovern, noting that most credit unions are now signed up with the Irish Credit Bureau.
5: You can’t get an exemption
To counter the tight lending rules, banks are allowed to offer exemptions to certain customers, allowing them to borrow more than 3.5 times their income (this applies to 20 per cent of FTB loans and 10 per cent of those trading up), or have a deposit of less than 20 per cent.
These means that the right applicants might be able to borrow 4.5 times their income, and need a deposit of just 8 per cent (FTB) or 10 per cent (trader upper).
Typically banks will offer one or the other, although Dowling notes that last year he managed to get an exemption on both fronts – but it was just once in the whole year.
But while exemptions are available, they are fast running out. They are also tough to get, with banks cherry-picking the safest bets.
“If it’s difficult to get a mortgage, it’s certainly more difficult to get an exception,” says Dowling, adding that a couple might need net income of €2,000 to qualify for a mortgage; but if they want an exemption, the couple will need €2,400 a month.
By nature, banks are snobs
6: You’re not a professional/in full-time employment
A doctor, even one on a fixed-term contract, will “always get a mortgage”, says Dowling, adding that teachers and nurses, even if not full-time, will typically also secure a mortgage.
For most other applicants, however, if you’re not in a permanent position you will find it difficult to secure a mortgage, while getting a mortgage if you’re self-employed is still very difficult.
“It’s very hard to get them across the line,” says McGovern.
And even if you are in full-time employment, your job will still impact.
“By nature, banks are snobs,” says Dowling, adding that when it comes to construction, for example, an engineer or quantity surveyor will get a mortgage more quickly than a bricklayer.
Indeed, some banks have minimum eligible salary requirements, of €30,000 or €40,000 for a single buyer, although the new affordable home loan scheme, available from local authorities around the country, might help in this regard.
7: You’re in negative equity
While there is such a thing as a negative-equity mortgage they’re in short supply, which means getting a mortgage to cover both your old and new debt a challenge.
“It becomes a very difficult exercise for them to trade out of negative equity to go to a bigger property,” says Dowling, arguing that this cohort of second-time and subsequent buyers are the “most discriminated against”.
8: You have a messy current account
Referral charges, overdrafts, car loans, unnecessary credit card charges, direct debits to a gambling account; all of these can mitigate your chances of getting either approval, or approval for the amount you desire.
“I’m amazed at the number of people who, irrespective of salary, are spending more than they should and have nothing left in the bank at the end of the month,” says Dowling.
And if you have a personal loan, such as for a car or college fees, it will impact on how much you can borrow so try and reduce if you can before applying.
“You need to sit down six months to a year beforehand,” advises McGovern, suggesting that you cut out unnecessary spending.
9: You’re a parent
Another issue is the cost of childcare. Banks apply a number of criteria when assessing your suitability; and one of these is the amount of income that goes towards your mortgage repayments. Typically, banks will want to see no more than 35 per cent of your disposable income go on your housing costs – and if you have children, extortionate creche fees can quickly push this percentage too high for a lender to have comfort with.
As Dowling notes, if there are two couples, one with children and one without, the “one without will get more money”.
It’s no surprise, then, that some putative house buyers go to great lengths to hide their “bump” or little people from a lender, by offering “alternative facts”. Indeed some financial advisers go so far as to suggest that while you can’t lie outright to a lender, you can obscure the truth somewhat, by suggesting that grandparents, rather than the local creche, mind your children, or hiding them altogether by getting your children’s allowance paid into a different account.
10: You’re too old
One significant change in the housing market in recent years is the age at which people buy their first home. Back in the boom years it was about 29, but it has since risen to 34, according to the Central Bank. While it can make sense to hold out for your “forever” home rather than taking a first step on the ladder, the difficulty with this is that once you cross the threshold of 40, the term at which lenders will offer you a loan starts to shrink.
For example, some lenders will lend only until you reach the traditional retirement age of 65; this means you will be able to secure a term of 25 years only if you’re 40, or 20 years if you’re 45, which can make monthly repayments significantly higher (although a shorter term saves you money in the long term due to lower interest) and thus particular properties unaffordable.