Home loan costs up in Dublin area but stable elsewhere

The annual cost of a mortgage for first time buyers has increased sharply in Dublin but remains stable outside the capital, according to the latest EBS DKM quarterly affordability index.

The price increases emerged as a pilot scheme between the Irish Mortgage Holders' Organisation and AIB/EBS/Haven comes into operation today to help distressed mortgage holders. It is hoped to assist 1,000 mortgage holders in the scheme as an alternative way for distressed homeowners to deal with AIB. Details are available at mortgageholders.ie or by phoning 1890 623 624.

The affordability index for first time buyers shows the price of an average house outside Dublin would in the first year of mortgage cost 17.3 per cent net income for a couple on the average industrial wage - a joint income of about €72,000. It is expected to rise to 17.7 per cent of net income by the end of the year. In Dublin affordability has weakened and the first year of mortgage cost is 22.4 per cent of net income, expected to rise to 23.7 per cent by year end.

Dublin property prices rose by 12.1 per cent in the six months to September. That month alone prices rose by 3.9 per cent, the highest rate of property inflation since 2007.

Annette Hughes, director of DKM consultants said the most affordable point in property prices was in December 2012 when it was 11.8 per cent of net income nationally to pay the first year of mortgage for the average house of €134,000.

The abolition of mortgage interest relief in January this year, €417 a month for an average house, the proportion of net income required to pay a mortgage in Dublin increased significantly, up to 22.4 per cent in September from 14.1 per cent lowest point in December 2012 but down from the peak of 32.5 per cent in 2006.

Ms Hughes said price rises were in part due to a supply shortage, rather than any substantial increase in demand. A MyHome.ie report showed there were only 3,800 houses for sale in the Dublin area in the three months to September, down 24 per cent from the previous year.