Mortgage rules should be eased, says brokers group

Commenting on today’s CSO Residential Property Price Index for June, Brokers Ireland said prices are reasonably steady but with a much reduced volume of over 33 per cent compared with the same month last year.

And with a mean house price of €286,663 in June, the organisation which represents 1,225 broker firms said a first-time buyer (FTB) would need a household income of almost €82k, based on the Central Bank income limit of 3.5 times income. In addition such a buyer would need to have saved a deposit of €28,666.

Rachel McGovern, Director of Financial Services at Brokers Ireland said: “As the country struggles to reach some semblance of normality in the face of the pandemic people whose lives had already been on hold because they couldn’t meet the requirements for a mortgage are being further disenfranchised in the fallout from the pandemic, with tighter lending conditions.”

She said there is still a massive gap between mortgage repayments and the cost of rent for similar properties.

“It is substantially more economical to service a mortgage, if you can acquire one,” she said.

The average rate of rent is €1,418 per month versus the repayments on a mortgage of €257,997 (90 per cent of €286,663) would cost €1,058.72 per month, a saving of €359.28 per month or €4,311.36 over the course of a year.

“We believe the 3.5 times income limit is too restrictive and should be extended to 4.5 times with loan-to-value requirement set at 90 per cent for all, including second and subsequent buyers,” she said.

“This would result in a fairer process with no exemptions. There would then be no need for lenders to be constantly trying to readjust their criteria on exemptions in a bid to stay within the requirements.”

Brokers Ireland has consistently maintained that home ownership acquired at an affordable price is the best way to grow personal wealth over the longer term.