First-time buyers forced to borrow €30,000 more to secure a property

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lff12

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First-time buyers forced to borrow €30,000 more to secure a property​

A few points here
- average FTB mortgage up by 30k
- average buyer arrives with 11k less savings than buyers a year ago had (possibly indicating that those who delayed sales due to covid backlog cleared)
- "asking property prices increasing by €30,000 in the three months to June compared with the same quarter last year" -ooof
- "the running down of savings and the household costs squeeze means house hunters now have €27,000 less to spend on a home than a year ago, or a reduction of 9pc" - again, ouch
- slight reduction in FTB approvals from last year (2,675 compared to 2,755 - yes I know its only 80 fewer)
- 55,467 mortgage approvals so far, highest since 2011
- home prices raised by14pc on same time last year or average of 35k

So not an easy time to be an FTB, thats for sure.
 
lff12 said:
- average buyer arrives with 11k less savings than buyers a year ago had (possibly indicating that those who delayed sales due to covid backlog cleared)
Click to expand...

This does not sound right or else it's misleading.

It suggests to me that people have less money than they had a year ago.

But that is not the case.

The average buyer today has less money than the average buyer a year ago. Of course, they are different buyers.

But even that doesn't sound right.

Brendan
 
Here are the relevant extracts from the press release




Single first-time buyers have €10,500 (19%) less savings for a deposit than this time last year.


The typical mortgage seeker now has €11,000 (15%) less savings to put towards a deposit than mortgage seekers in the same position a year ago.​


In the case of first-time buyer couple mortgage seekers, they are particularly feeling the pinch with €15,000 (23%) less savings than equivalent buyers a year ago.

“It could be argued that the 15% reduced saving and therefore 9% reduced spending power for these house hunters may be a result of spending bouncing back as the covid-19 pandemic restrictions lifted or could also be due to these customers feeling the pinch due to rising cost of living.” says Paul Monahan, General Manager at daftmortgages.ie.
 
Huge Sample Size: These findings are based on Q2 2022 v Q2 2021 and come on the back of an analysis of over 170,000 people who submitted their buying plans in preparing for a mortgage on daftmortgages.ie. 81% of these customers are First Time Buyers, and 19% are Second Time Buyers.

Something wrong there.

According to the Banking and Payments Federation

Some 11,985 mortgages were drawn down between April and June,

So in one quarter of this year, 170,000 people submitted their buying plans to daftmortages.ie.

Brendan
 
I spoke to daftmortgages

18 months ago they launched a mortgage calculator.
Since then 170,000 people have used it to work out how much they could borrow - so about 30,000 per quarter.
 
Deposit + mortgage = House price

So it should be possible to work out the average deposits actually used to buy houses, if we get the average house price and the average mortgage.
 
The Cohort of FTBs in Q2 2021 input €55,000 into the calculator.
The Cohort of FTBs in Q2 2022 input €44,500 into the calculator.

Do we know what the average FTB LTV is?

I am assuming it is about 80%.

So in Q2 2021, the average house price for FTBs was €275k.

That would seem reasonable.

Brendan
 

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I'd be interested to see how the those figures compare to 2019. Pandemic years (2020/2021) would be outliers. A lot of people were able to build up savings at a rate they normally couldn't.

It had the effect of bringing a cohort of purchasers into the property market sooner than expected. With static supply the impact would be higher prices (through higher deposits). Now let these purchasers wash through the system and you would expect some kind of return to pre-pandemic trends.
 
Brendan Burgess said:
Huge Sample Size: These findings are based on Q2 2022 v Q2 2021 and come on the back of an analysis of over 170,000 people who submitted their buying plans in preparing for a mortgage on daftmortgages.ie. 81% of these customers are First Time Buyers, and 19% are Second Time Buyers.

Something wrong there.

According to the Banking and Payments Federation

Some 11,985 mortgages were drawn down between April and June,

So in one quarter of this year, 170,000 people submitted their buying plans to daftmortages.ie.

Brendan
Click to expand...
That would be basically just people filling in their forms, right? So probably very notional and probably more reflective of people shopping around or looking at a more notional idea of what they might actually buy if they could. The same person could of course submit their request multiple times - its pretty much like taking the results of the submissions from an insurance brokers website rather than the output of completed applications who went through to purchase a policy?

While it doesn't sound useful, it might give an indicator as to potential plans or intentions from potential buyers who are looking at buying, which is something that doesn't get captured by the official figures because until the advent of fully digitised applications they wouldn't even let you make an application unless you already had at least a 10% deposit and at least 4-5k extra for legal, stamp duty and other buying costs.

Also hearing a lot from other buyers that they are getting AIP 2 or 3 times before they actually go ahead with a purchase. Would be interested to hear if there is data showing how many buyers did not go on to buy after getting AIP (and perhaps stats on how many agreed sales fell through and reasons why).
 
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Coincidentally - or not - under the new "Enhanced Help-to-Buy Scheme" doesn't the government now allow people to get up to €30,000 back in income tax paid in the previous four years?

"If you sign a contract for a new house, or draw down on a self-build mortgage, between 23 July 2020 and 31 December 2022, you are eligible for the increased relief.

You can claim relief on the lesser of:

  • €30,000
  • 10% of the purchase price of a new build property
  • 10% of the approved valuation of a self-build property
  • The amount of income tax and DIRT you paid for the previous 4 years
The maximum payment is €30,000 per qualifying property under the enhanced relief. This cap applies regardless of how many people enter into a contract to purchase the property."

Help to Buy Scheme

The Help to Buy Scheme offers a tax refund for first-time buyers of newly-built homes.
www.citizensinformation.ie www.citizensinformation.ie
 
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