The uptake of 100 per cent mortgages is on the decline, a leading mortgage broker has said, despite new figures from the Department of the Environment showing that one-third of first-time buyers took 100 per cent loans last year.
Research carried out by the Irish Mortgage Corporation shows that the number of house buyers taking out 100 per cent mortgages has fallen for the first time since their introduction in 2005.
In the first six months of this year 24 per cent of first-time buyers financed their homes with 100 per cent mortgages compared with 35 per cent in the second half of 2006. Director of Irish Mortgage Corporation Frank Conway said the decline will continue this year. "Fewer first-time buyers are now taking out 100 per cent mortgages. This is expected to drop below 20 per cent during the second half of 2007."
The reduction in the number of 100 per cent loans coincides with recent interest rate rises which have contributed to falling house prices. House prices increased by 9 per cent in 2006 but have "eased" since the start of this year, Minister of State with responsibility for Housing Batt O'Keeffe said.
"House prices have eased since the last quarter of 2006. This was the result of reductions in affordability due to interest rate increases and very steep price escalation in the previous 18 months or so in the context of very strong housing demand and mortgage lending," he said.
The Department of the Environment statistics show that houses are becoming less affordable with the cost of servicing a mortgage taking up an ever increasing percentage of a buyer's income.
Last year the mortgage outgoings of a two-income household represented about 31 per cent of their disposable income, compared to 22 per cent in 1995 and 29 per cent in the early nineties. This trend looks set to continue in 2007 with the increase in mortgage interest rates. However, the Irish House Builders' Association (IHBA) has disputed the department's figures and claims that the proportion of homeowners' incomes going to service mortgages has remained stable. "The department's analysis of affordability fails to factor in the impact of the Government's decision to double mortgage interest relief for first-time buyers in last year's budget," IHBA director Hubert Fitzpatrick said.
Despite the rate increases Mr O'Keeffe said that it was a buyers' market. Prices were stabilising and he would encourage first-time buyers to enter the market now rather that wait until next year. "I would be saying to people that it's more a buyers' market than a sellers' market at the present time . . . Prices are stabilising, there is better value for money. We're at 2005 prices at the present time."
Mr O'Keeffe was speaking on RTÉ Radio yesterday.
