'Better affordability' for first-time buyers

The average first-time buyer is spending more than 20 per cent of their net income on mortgage repayments, but affordability is improving, a new survey has found.

According to the EBS/DKM Affordability Index, the average couple pays out 22.6 per cent of their net income on mortgage repayments, a fall from 26.4 per cent a year ago. The average couple spend 8.8 per cent less on mortgage repayments in December 2007 compared to the same month a year before, it reported.

This is set to improve over the coming year, with payments predicted to fall to 21.7 per cent of net income by the end of March 2008.

The index is based on the assumption that the couple is on average earnings and is buying an average new house with a 90 per cent mortgage.

The change in the index has been attributed to Budget changes to mortgage interest relief, the fall in house prices and the decision by the European Central Bank to hold off on interest rate increases in the second half of the year.

The housing market has slowed in recent months, with house prices falling by an average of 6 per cent, but it is expected to recover some ground during the latter half of 2008.

The market is looking up for first-time buyers.

"Looking ahead, the housing market is expected to continue adjusting to normal levels of growth," said Dara Deering, director of membership business, EBS Building Society.

"It will take some time for positive sentiment to fully return in the market. House prices will continue to ease back - probably in the order of 5 per cent in 2008, with some areas impacted more than others.

"I would expect to see this trend reverse in the second half of 2008 with the period of interest rate stability and a lack of further price increases encouraging buyers back."