The pursuit of homeownership in 2024 is more challenging than ever, with demand from first-time buyers at an all-time high and stiffer competition for houses fuelled by rising incomes.
A record 30,000 first-time mortgage applications were approved in 2023, with the median age increasing to 35 on a household income of €82,000. The average first-time buyer mortgage is now over €295,000.
“Escalating property prices and mortgages also lead to more substantial deposits being required, presenting significant hurdles for prospective homeowners,” says Martina Hennessy, managing director of doddl.ie
“I recommend five strategies to empower aspiring homeowners - including accessing and understanding financial supports, as well as broadening their search beyond conventional avenues.”
1. Navigate first-time buyer schemes
Understanding and leveraging available schemes is crucial. Two prominent options are the Help to Buy Scheme and the First Home Scheme.
The former offers a tax rebate to eligible applicants, providing 10 per cent of the purchase price up to a cap of €30,000 for new build purchases valued up to €500,000.
The First Home Scheme is designed to bridge the financial gap between mortgage eligibility, the deposit, and the purchase price of a new build home. Applicants can receive up to 30 per cent of the home's purchase price, capped at 20 per cent when used alongside the Help to Buy Scheme.
2. Broaden your search beyond new builds
While support schemes predominantly focus on new build homes, there is a significant market of second-hand homes. First-time buyers, who may find it challenging to accumulate a 10 per cent deposit, are often put off by the modernisation but financing renovation works through their mortgage is worth exploring.
For instance, if a client is approved for a €360,000 mortgage based on a €400,000 purchase price but secures a property for €350,000 with €50,000 worth of planned works, the bank may release 90 per cent of the total cost for both purchase and renovation. This is subject to satisfactory invoices for non-structural work or certification by a professional for structural modifications.
3. Understand mortgage eligibility
The Central Bank of Ireland establishes mortgage lending rules, currently set at four times allowable income for first-time buyers, and 3.5 times for second and subsequent buyers. However, individual lenders have distinct underwriting criteria, offering varying mortgage levels.
Seeking market-based advice from a broker is crucial to maximising mortgage eligibility, as some lenders provide exceptions to Central Bank rules, allowing borrowing up to 4.75 times allowable income.
4. Prove you can afford the mortgage repayments
Repayment ability is a critical factor, and providing clear evidence of this over the six months preceding the application is essential. Repayment capacity can be demonstrated by monthly savings and rent or mortgage paid in the case of a second-time buyer.
While there is no silver bullet to saving, January is a great time to review your annual outgoings and some of the ‘nice-to-haves’ that can be diverted into a savings account. A good idea is to set up a direct debit and start treating savings as you would any other monthly payment.
5. Shop around for the best mortgage rate:
Ten consecutive interest rates increases through 2022 and 2023 not only affected existing homeowners but those seeking a mortgage.
A lender will add two per cent to the mortgage rate it offers to stress test the mortgage applicant's ability to repay the mortgage if rates increase further.
With rates differing greatly between lenders – from 3.65 per cent to seven per cent – it is now more important than ever to shop around for the best rate.
