Are you a first-time buyer who has diligently saved for your deposit, without any help from your parents? Are you optimistic about the economy, and hope to move onto bigger and better homes once you have successfully grabbed hold of the first rung of the property ladder?
If the answer to both questions is yes, then you are part of the independent, confident and ambitious breed of first-time buyers currently helping to push mortgage borrowing here to the point where overall home loan debt is increasing at an annual rate of more than 27 per cent.
Almost two-thirds of first-time buyers responding to a survey released today by mortgage intermediary Irish Mortgage Corporation said they had funded the deposit for their new home through their own savings. This compared to 28 per cent who said they had partly or wholly funded the deposit with the help of a parental loan or gift. Nearly two-thirds of the respondents said they had lived in rented accommodation prior to purchasing.
"Respondents exhibit a capacity for financial independence when it comes to purchasing their first home by living in rented accommodation and saving for the deposit at the same time," according to Irish Mortgage Corporation.
With rents in Dublin averaging €950 for a standard one-bedroom apartment and €1,250 for a two-bedroom apartment, the cost of renting can easily exceed the cost of paying a mortgage. For a new two-bedroom apartment costing €275,000 with a down payment of 8 per cent, the mortgage required would be €253,000.
On a 30-year mortgage with an interest rate of 3.1 per cent APR, the monthly payment would be €1,080. Allowing for mortgage interest relief, the monthly mortgage repayments would work out at €951. It is not difficult to see why renting is sometimes compared to handing over "dead money".
Some 7 per cent of respondents bought their first home with family or friends, with three or four family members or friends pooling their incomes in order to buy in some instances.
Irish Mortgage Corporation calls this "playing it smart" with their income, in other words shunning a cumulative rental bill of €25,000-plus over four to five years, while gaining capital appreciation and reducing the mortgage principal in the meantime.
Tenants and twentysomethings yet to leave the parental nest will have to weigh up the risk that waiting to buy could mean house prices spiral further out of reach, while taking the plunge at the peak of the market could leave them trapped by negative equity.
With interest rates set to rise and the Central Bank this week issuing its strongest warning to date that further house price increases could tip the market over into a period of falling prices, is now really a good time to make the leap from rent cheque to mortgage repayment?
According to Irish Mortgage Corporation, there is at least one way to soften the blow of interest rate rises: the rent-a-room scheme. Only 13 per cent of respondents had availed of this scheme, in which rental income of up to €7,620 a year is exempt from tax.
So, the survey implies, as long as you don't mind sharing a roof with someone whose name is not on the deeds, you may still have scope to borrow without fear and let someone pay you the dead money for a change.
