First-time buyers in Ireland are continuing to enter the property market at an increased rate, despite rising interest rates and home prices. High rents and uncertainty of tenure are driving these buyers to purchase their own homes. The Banking and Payments Federation of Ireland (BPFI) has reported that while the overall number of mortgage approvals has decreased compared to last year, the volume of first-time buyers receiving approval has increased. This surge in first-time buyers is helping to support the market after a decline in switching activity. Mortgage brokers have stated that although interest rates have increased, it is not the most important factor for applicants as long as they can afford the repayments.
The European Central Bank (ECB) has raised interest rates by 4% since July 2021, with more increases expected in the future. However, Martina Hennessy, CEO of mortgage broker Doddl, believes that the increasing interest rates have not dampened demand among first-time buyers. She attributes this to strong demand in the labor market and housing sector, as well as the fact that rental prices are also high. Hennessy points out that even with the increase in interest rates, first-time buyers often pay more in rent each month. BPFI figures show that the number of mortgage approvals has been declining across all categories between March and May, compared to the same period in 2022. However, the number of approvals for first-time buyers has increased by 20.1% to 3,170, preventing a significant decline in the market.
In May, the total value of all mortgage approvals was close to €1.4 billion, with first-time buyers accounting for €926 million. Similar trends were observed in April and March, with approvals for first-time buyers increasing by 5.3% and 15.7% respectively, compared to 2022. The average mortgage approval value for first-time buyers was €292,113. Based on a 4.5% five-year fixed rate over 30 years, monthly repayments would amount to €1,480. Despite these figures, the high cost of housing remains a significant issue, primarily due to the chronic lack of supply in the market. The average market rent nationwide for the first quarter of this year was €1,750 per month, making it still cheaper to buy than to rent.
According to recent data from Daft, house prices in Ireland fell during the second quarter of 2022 compared to the same period in 2021. However, prices remain higher than during the Celtic Tiger peak and more than double the low reached in early 2013. Daragh Cassidy, of mortgage broker Bonkers.ie, attributes the high house prices to the chronic lack of supply in the market and the new mortgage rules introduced by the Central Bank of Ireland at the beginning of the year. The ability to borrow up to four times their income, instead of 3.5 times, has supported prices to some extent.
Although mortgage approvals are increasing, it can still take up to six months for people to secure a home, at which point they will be subject to the new interest rates. However, buyers are not considering future interest rate increases when applying for a mortgage. Trevor Grant, chairperson of the Association of Irish Mortgage Advisors, highlights that the average age of a first-time buyer is now in their mid-30s, compared to less than 30 in previous years. Grant believes that the surge in applications is due to the difficulties in finding and renting properties, as well as the lower monthly repayments compared to rent.
David Hall, of the Irish Mortgage Holders Organisation, adds that tenants have a lot of uncertainty when it comes to their rental properties, which is why they are looking to buy. The demand in the housing sector is driven by the desire for certainty and stability. Despite the challenges posed by rising interest rates and high prices, first-time buyers in Ireland are still determined to enter the property market and secure their own homes.