The cost of a mortgage for first time buyers will have dropped by 50 per cent by December, compared to three years ago, according to a new forecast.
The quarterly EBS / DKM Affordability Index predicts that the cost of a mortgage for the average first time buyer working couple will fall to 13 per cent of their net income by December.
Three years ago, a first time buyer couple would have spent on average 26.4 per cent of their net monthly income on mortgage repayments for a new home.
The EBS/DKM Housing Affordability Index is a measure of the proportion of after tax income required to meet first year mortgage repayments for an average’ first-time buyer (FTB) working couple, each on average earnings with a 90 per cent mortgage. It takes into account changes in mortgage rates, changes in the level of mortgage interest relief, and is based on average earnings and average FTB new house prices nationally and in Dublin.
First time buyer mortgage repayments are expected to be 44 per cent lower by the end of the year compared to 2007, equivalent to €539 per month, according to the index.
By December, the projected net repayments for a first-time buyer working couple on a €165,000 mortgage will have fallen by €513 per month since July of last year on a national basis. The equivalent drop in Dublin will be €643 per month, or 41 per cent.
According to Dara Deering, director of membership business at EBS, while the overall number of national first time buyer’s transactions had fallen to 3,184 this year, there is evidence of an increase in activity in the market in recent months.
“The number of mortgage applications at the society has grown by 66 per cent over the past three months when compared with the first three months of the year. September was a particularly busy month with more than double the level of applications that we received in February. A significant portion of this activity is being driven by first time buyers who now account for 45 per cent of the house purchase market," said Mr Deering.
“While there continues to be a lack of clarity about how far the market has yet to fall, the reality is that for many first time buyers, and indeed second-time buyers, the home that they want, in a location that is suitable for them is likely to be very competitively priced at the moment. The increased volume of applications, albeit in a declining market, indicates that growing numbers of people are considering taking advantage of the current levels of pricing at this time,” he added.
