Call for first-time buyer deposits of 10% up to €400,000

A lobby group for the property industry has urged the Central Bank of Ireland to lift the threshold at which first-time buyers pay a 10 per cent deposit for a mortgage to €400,000 for houses in the greater Dublin area and to €350,000 for the rest of the State. At the moment the limit is €220,000 and then it rises to 20 per cent on the balance.

Property Industry Ireland (PII) also also wants mortgages to be calculated on 4.5 times salary, up from 3.5 times, and recommends that the reference point be calculated on a buyer's net income rather than gross earnings.

It argues that these changes are needed to help first-time buyers get on the property ladder in Dublin and neighbouring counties and says the thresholds should be reviewed on an “ongoing basis” to reflect changing trends in average house prices.

“We believe a higher LTV [loan-to-value] limit of €400,000 within GDA [greater Dublin area] and €350,000 for the rest of the country would continue to support the principle of seeking to reduce risk to both lenders and borrowers of inflated house prices with LTV limits being set at levels that are more closely aligned with the economic value or replacement value of the house,” PII’s submission states.

Deposit

The current macroprudential rules require first-time buyers to have a 10 per cent deposit for the first €220,000 of a house price and 20 per cent on the balance. All other classes of buyer are required to have a minimum 20 per cent lump sum in place before being approved for a home loan.

A loan-to-income limit of 3.5 times must also be applied by banks but PII wants this to be increased to assist buyers in the greater Dublin area where the “relationship between average prices and average salaries are most acute”.

“It would also assist single-income purchasers avail of a mortgage, many of whom have a proven capacity to service a rent of a similar – if not higher – amount,” it said.

PII is a unit of employers’ group Ibec and its membership includes developers and contractors, legal and accountancy firms, planners, architects, engineers and surveyors.

It said introducing a 10 per cent LTV ratio for houses costing €350,000 would reduce the required deposit by €13,000 while monthly mortgage repayments would increase by only €58 a month.

PII said the “real impact” of the current LTV rule was that many purchasers would opt to raise the required deposit through further unsecured loans or gifts from family members.

“Reliance on family members simply creates segregation in the house-buying cohort, between those fortunate people whose family circumstance allows them access to finance, and those who have more limited borrowing power because of a lack of available family support.”