Value of mortgage loans for first time buyers down 40% from 2008

First time buyers are now borrowing on average 40% less from mortgage lenders than they were during the peak of the property boom five years ago

Figures from the latest affordability index compiled by the research group DKM Economic Consultants and mortgage lender EBS show that there has been a 40% decrease in the average amount being drawn down by first time buyers. In the first three months of 2013, the average mortgage given to a first time buyer was €150,292. This is over €100,000 less than what the average first time buyer drew down in the same period in 2008 – €251,000.

These figures reflect another key finding from the research. Due to the drop in property values following the market’s collapse, it has made it far more affordable for those to get their first mortgage. It’s unsurprising therefore that first time buyers account for nearly two thirds of fresh loans being issued by lenders. There is confidence from DKM that affordability is going to be stable up to the year end.

But long-term sustainable affordability is contingent on certain economic factors being tackled. Most notable of these issues are Ireland’s high unemployment, the on-going mortgage arrears crisis as well as the negative equity trap in which thousands of homeowners find themselves. The affordability index, which measures the proportion of net income spent per month on servicing a mortgage, currently stands at 13.9% for a first-time buyer couple.

In 2008, the affordability index for a couple was almost double the current figure – 26.4%. Whilst it has become more affordable for couples to buy a home, the situation has not really changed that much for single applicants who would have to be able to put aside over 27% of their net monthly income in order to keep up on their monthly loan repayments.