New mortgage rules allow relief for first-time buyers
“New mortgage rules announced by the Central Bank will allow first-time buyers some relief from the new 80 per cent loan to value limit. For first time buyers, banks will be able to lend 90 per cent up to a value of €220,000. Above that the 80 per cent limit will apply.”
So it seems real first time buyers caught a break albeit a minor one. Anyone buying their first home and borrowing over €220,000 will now have to save double the deposit than they would have before. That’s not a small number of buyers. However the lower end of the market, sub €250,000 homes and apartments, or anywhere outside the capital, should be largely unaffected.
For non-first time buyers looking to change or extend their mortgage to buy a new house, they will have to have a 20% deposit. On the face of it this isn’t such a big deal, and thankfully anyone in negative-equity looking to move home will not be under the new plans. This would be the worst part of the plan if they had left this out, after years of fighting to allow negative-equity households to move it was only just starting to happen in 2014.
However, the hidden kicker that hasn’t been much in the news is the 70% cap for buy-to-let loans. Now the buy-to-let lending market is nowhere near as big as it once was, only a few banks are openly lending and usually with strict criteria anyway, but this may affect investors in the mid-tier market too.
Property price inflation to moderate significantly – report
The SCSI released their report and outlook for 2015 yesterday before the full extent of the new mortgage rules were released. Their forecast is that property price inflation will moderate this year, from 15-20% in 2014, to a still healthy 5-10% in 2015.
The report is based on a nationwide survey of it’s members and doesn’t seem unreasonable, however with the watered down proposals and still a desperate lack of properties for sale in Dublin, we wouldn’t be surprised to see double-digit growth again.
Simon Stokes, chair of the SCSI’s Residential Property Professional Group said:
“The lack of supply of family type homes in the main urban areas together with increased demand from prospective purchasers has resulted in double digit increases in average property prices across the country, particularly in the first nine months of the year. Supply restraints will lead to increased demand in commuter belt counties”.
City dwellers get yet another property kicking
Mark Keenan writes an astute column for The Independent after the mortgage rules are announced:
“At a time when there has seldom been a bigger gap between Dublin prices and those elsewhere, fairly ordinary Dublin semis average between €300,000 and €400,000 – placing them firmly in the top 20pc deposit range.”
He points out this will lead to a further rise in rents as prospective first time buyers bed down into another few years of renting and saving until their deposit is large enough, making it near impossible for young Dublin couples to get a foot on the ladder.