Your Money

Relying on deposits from the bank of mum and dad

Election promises and upbeat lending figures cannot hide a depressing reality

Figures this week confirm again that first-time buyers account for just over half of all mortgage business. But behind the numbers is a depressing reality

Thu Jan 30 2020 - 05:48

If there has been one common refrain among all political parties in the election campaign, it has been the plight of the first-time buyer.

Locked out of the market by unaffordable prices and Central Bank lending rules, they have been funnelled into a rental market experiencing record price levels or forced to remain at home.

But to look at the message coming from lenders, you'd be inclined to ask: "Crisis. What crisis?". Monthly mortgage lending figures for the Banking and Payment Federation of Ireland, the industry group representing the lenders, routinely show that first-time buyers are leading the charge both in securing mortgage approval and drawing down funds.

Figures this week confirm again that first-timers account for just over half of all mortgage business, with 6,374 buyers drawing down just under €1.5 billion in loans in the final three months of last year to pay for homes.

READ MORE

The headlines sound great but when you break down the figures, it’s a different story. That data from lenders means the average first-time buyer is securing permission to borrow just over €230,000. Assuming they have the 10 per cent deposit required under the Central Bank rules, that means they can afford to buy a home for just under €260,000.

Even outside Dublin that would be a reach; in the capital, where the median price is now around €370,000, it would be close to impossible. Most of these buyers are either saving a deposit well in excess of 10 per cent or they are relying on gifts or loans from the bank of Mum and Dad.

All political parties have been outlining grandiose plans to address this key election battleground. Some promise to channel more money into incentives, such as enhanced help-to-buy or SSIA-type schemes, even though it is clear that most of this money will end up in the pockets of margin-pressed developers who will simply increase prices.

On the other side, there are commitments to address housing supply, with tens of thousands of affordable homes – despite industry warnings that this is simply not feasible.

And in the middle? Weary wannabe buyers, who are tired of promises, statistics and platitudes, and simply want a working housing market.

LATEST STORIES