There are fewer first-time buyers in the housing market now than even a year ago, based on figures from one of the building societies, and the proportion compared with five years ago has dropped remarkably.
First-time buyers now account for about 40 per cent of all Irish Permanent mortgages, which is the biggest lender in the market. People trading up account for approximately the other 60 per cent. But just five years ago that proportion would have been reversed and even a year or two ago it was split evenly down the middle.
However, escalating house prices have priced many first-timers out of the market. The abolition of the 2 per cent anti-speculation tax for investors is likely to make the situation worse. There had been evidence, according to the Department of Finance, that these measures had been beginning to work but the Minister nevertheless abolished the measures after sustained lobbying from developers and other members of the Cabinet, including the Taoiseach.
Another change is that there are substantially fewer first-time buyers buying on their own. Again, several years ago these would have made up almost half of the market but now the sole buyer is the exception. People are still buying with their partners but buying with a friend is becoming increasingly popular.
At times, groups of three or even four friends are banding together to buy a home. The problem with this is that lenders will generally only allow two names on the mortgage and hence on the house deeds. They will take the two highest salaries into account but the others will be completely ignored. But according to lenders, many groups of friends buying together will all be chipping in for the deposit and sharing the repayments.
In time, the capital appreciation will also be shared between all three or four. However, if you are thinking of going down this road it is extremely important to get very good legal advice and make sure the arrangement is properly drawn up and agreed by all parties.
Of those who are not buying with partners or friends, a parental guarantee can be used. Many lenders do not like using this as the prospect of going after a parent if the son or daughter fails to pay is not enticing in terms of either PR or costs. Other parents are considering taking out a joint mortgage with their son or daughter with the intention that the full repayment would be met by the child. This is favoured by the lenders as the parent is then fully responsible for all repayments. However, parents should beware as this can be a substantial commitment for a long number of years.
It is also very important to remember that the son or daughter will not be able to avail of the first-time buyer grant. The grant is only available if neither party to the mortgage has owned a home before.
Irish Permanent will lend up to 92 per cent while Bank of Scotland will only go as far as 80 per cent, making it more suitable for those trading up who already have equity.
According to the Irish Permanent, the vast majority of all first-time buyers go for the maximum amount that they can borrow.
Borrowers should also remember that they can make savings by shopping around for a solicitor. In the past all solicitors charged 1 per cent of the purchase price but with the rise in property prices this fee is nearly always reduced and charges can vary from £400 (€508) to £1,000 (€1,270) for a basic conveyance.
