Too old to buy? The challenges of buying a house when you’re older
Irish homeowners are getting older. According to a new report from Banking & Payments Federation of Ireland (BPFI), the median age of first time buyer borrowers rose to 35 for the first time in the year to June 2023. This is a sharp increase on the typical age of those buying their first home in years gone by.
Back in 2004, for example, almost two in every three first-time buyers was aged 30 or under. By 2015 this had shrunk to about one in three: now it’s just one in five. This means that almost half of all first-time buyer purchases (44 per cent) are by people who are aged over 35, compared with just 17 per cent in the same age cohort back in 2004. “I’m nearly 30 years in this business and you can clearly say that buyers are getting older,” says Michael Dowling of mortgage specialists Dowling Financial. More than anything, he says it’s the economics of buying a house with house prices rising ahead of income growth that is behind it, but he notes that lifestyle factors, such as people going to Australia or travelling for a year, also result in the buying decision being pushed out.
“In reality, all stages of life seem to have pushed out,” says Martina Hennessy, managing director of Doddl, adding that it is also taking people longer between getting mortgage approval, to drawing down their mortgage, due to issues around supply. The rise in single buyers is another factor behind the shift in ages, as it can take longer for them to attain their goal, given the cost of property. “In my experience, it’s single applicants who have to be more established in their career to be able to buy,” she says.
Separation and divorce are likely other factors behind the growth in older buyers. As long as your name is no longer on a house deed when you go to purchase, you can be treated as a first-time buyer.
There are obvious upsides to being an older buyer – the chance of earning a larger income being one. Indeed the BPFI report shows that median incomes were up by 6.5 per cent in the year to June 2023 for first-time buyers, to almost €82,000 annually (or €90,200 in Dublin when buying a second-hand property). This led to an increase in the amount they were borrowing, with the median first-time buyer mortgage up by €20,000 to €270,000. However, there are also particular challenges associated with being an older buyer.
Shorter mortgage term
The older you are, the shorter your term is likely to be. As the report notes, older first-time buyers also had shorter loan terms than their younger equivalents, with almost 85 per cent of first-time buyers aged over 35 having loan terms of 30 years or less. This is partly because many buyers wouldn’t like to carry such debt into retirement with them. While they may continue working into their late 60s, many employers still have a retirement age of 65, with the state pension not kicking in until 66 or thereafter.
Secondly, lenders typically have a maximum lending age, beyond which they won’t lend. Bank of Ireland will offer a loan term of 35 years – however, you must be no older than 70 by the end of the mortgage term. With PTSB, you must have finished your mortgage term by the age of 70, while AIB/EBS will only lend to the age of 68.
In addition, Hennessy notes that some lenders may also restrict the mortgage term to 66 years, or need to see a provision for a pension if going above this. “One of the questions that banks ask me for a 35-year term for anyone other than public servant is do they have a pension?” says Dowling, noting that banks can easily see such deductions in your payslips. “Some won’t lend beyond age 65, unless they can see evidence of a pension,” he says, even if, “in reality, the bank hasn’t a clue what pension they will end up with”.
This means that if you’re 42, for example, you won’t be able to get a mortgage over a 30-year term with most lenders. You’ll be restricted to a term of just 26 years with AIB. And what if you’re buying as part of a couple and one member is older than the other? Hennessy cites the example of a client who is 33 and is looking to purchase with a partner who is 45. “They would like a 30-year term but cannot due to the age of the elder applicant. Regardless of whose income is stronger, if any income is taken from the elder applicant then the term has to be at their age at expiry,” she says.
On the plus side, a shorter term can mean a cheaper mortgage, as you will end up paying lower levels of interest over the full term of the loan. Hennessy gives the example of a €300,000 mortgage, where you would pay one-third less interest repaying over 25 years, than over 35 years, or almost €100,000 less.
Limit on mortgage
However, if the term of your mortgage is shorter, the amount you can borrow may also be reduced. This is because monthly repayments will be higher if the term of the mortgage is based on a shorter period. Consider someone with a joint income of €90,000. Based on the Central Bank’s lending rules of four times income for a first-time buyer, they should be able to purchase a home worth €400,000, based on a 10 per cent deposit of some €40,000. On a monthly basis, this would mean repayments of €1,385.46, based on an interest rate of 3 per cent. However, if the applicant only qualifies for a 25-year term, then repayments would shoot up to €1,707 a month, or some 23 per cent – €322 – more.
Given that banks typically stress test monthly repayments on the basis that interest rates might rise by two percentage points, the applicant going for the 25-year loan may find that there is a reluctance to lend them the full €360,000 as they don’t have enough income to pass this test – even if the Central Bank rules dictate that they should be allowed the full amount. Dowling had a recent client, a 52-year-old who had just separated and was buying on her own and looking to get 3.5 times her income. Her lender approved an 18-year term but because she couldn’t show the repayment capacity of that mortgage when the repayments were stress tested, she couldn’t borrow the full 3.5 times salary. “Don’t automatically assume you’ll get 3.5 times/four times salary,” says Dowling.
Hennessy notes that when there is a shorter term, it can find itself measured against a debt service ratio, which is known by different names among different lenders, but is ultimately the same thing: the mortgage repayment to net income ratio. The debt service ratio only starts to get tight if you are going over four times income, or if the term is really pulled back severely. Accessing life insurance, which is needed to get a mortgage, can be another issue. “You rarely have a problem getting life cover for someone in their twenties, but as you get towards 45, it might be more difficult,” says Dowling.
Trading up
In a typical world – or at least that which has gone before – a property buyer will buy a so-called “starter home” before trading up a few years later to either a larger home or one that is in their chosen location, perhaps closer to schools, etc of their choice. This is often achieved due to a combination of two factors – rising house prices and a falling mortgage – which allows them to build up equity in their home that can be subsequently used as a deposit/down payment on their new, more expensive home.
However, this approach will often require time to work – something that the older buyer won’t have. While the situation has improved somewhat – Central Bank rules dictate that second-time buyers now need a deposit of 10 per cent to trade up, where previously it was 20 per cent – it can still be a difficult process. “You’ll have less equity if you want to trade on subsequently,” says Dowling. As first-time buyers continue to age, it is no surprise that fewer people will manage to buy their own home. Latest home ownership figures from Eurostat show that Ireland now has the ninth lowest home ownership rate across 33 European countries, at 70.4 per cent. Back in 1991, the rate was more than 80 per cent.
This puts it ahead of countries that traditionally have had large numbers of their population renting long-term, such as Germany (46.7 per cent); Denmark (59.6 per cent); and France (63.4 per cent), and in line with the average for the EU-27 (69.1 per cent). However, it now lags behind other European states such as Spain (76 per cent); Portugal (77.8 per cent) and Poland (87.2 per cent).
Such a low rate may be seen as being problematic when the Irish rental market remains constrained and expensive.
News by irishtimes.com, (Fiona Reddan).
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What the loss of Ulster Bank would mean for consumers
When news broke on Friday that NatWest, parent of Ulster Bank was considering the winding down of the Bank, the market was surprised. It had […]
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Your money: Seven things you must know on the new mortgage playing field
Cheaper home loans will be up for grabs for house hunters and homeowners in the coming weeks and months following the entry of a new […]
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Spanish giant to rattle the cages of big firms who have Irish market cornered
You would be forgiven for thinking that competition in the mortgage market had gone by the wayside, like many things during the pandemic. Banks are […]
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Interest rate war brews as new bank joins market
A Spanish banking giant is to enter the Irish mortgage market in a move sure to put massive pressure on existing lenders to slash their […]
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Banks block drawdowns until end of pay subsidy
Builders and brokers say hundreds of agreed home sales are being placed in jeopardy because of an unintended consequence of the State’s emergency wage subsidies. […]
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Banks have yet to heal the €60bn bailout wounds of a decade ago
A decade after a €60bn taxpayer bailout of the country’s main banks, we still have a problem with trust when it comes to how they […]
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Ireland faces second mortgage arrears crisis when payment breaks end this autumn, leading financial advisers warn
A leading debt adviser has warned that 30,000 households — or around half of the 62,480 currently on home loan payment breaks — will fail […]
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House prices due to fall sharply in wake of pandemic
House prices are likely to fall sharply over the next year, a leading think tank has predicted. The Economic and Social Research Institute (ESRI) has […]
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Central Bank boss defends banks withdrawing mortgage offers
Central Bank Governor Gabriel Makhlouf has defended banks that are withdrawing mortgage offers to people whose incomes are hit by the fall-out from the pandemic. […]
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Irish Banks Again Europe’s Worst Performer as Crashes Add Up
Once again, Irish banks are at the sharp edge of a global crisis. In 2008, it was the melting away of liquidity. Just over a […]
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Mortgage borrowers hit by Covid-19 jobs slump ‘facing problems securing mortgage breaks’
Mortgage borrowers previously in arrears but who are now up to date with their monthly payments have had difficulties in automatically accessing the three-month mortgage […]
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Banks add Covid-19 income conditions to mortgage offers
Raft of assurances are sought over bonuses, overtime and future job security Several Irish banks and lenders are adding new conditions to mortgage loan offers, […]
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Self-employed may feel chill from Covid-19 for some time
The self-employed face mortgage struggles. All business owners are weighing up the effect of the Covid-19 closures on their trade at present, with many trying […]
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House valuations are being reduced by 10pc during the mortgage process due to Covid 19 according to brokers
Some bank valuations are lower than agreed sale prices due to Covid-19 “The valuations are coming in at less than what the agreed purchase prices […]
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Home truths: Covid’s duration will determine its impact on values
Speculation about where house prices and the property market will end up in the aftermath of Covid-19 has already started, with the publication during the […]
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Doubts raised over Covid-19 wage subsidy scheme after lawyers warn the initiative is unworkable
The crucial wage subsidy scheme aimed at keeping hundreds of thousands of people in jobs has been thrown into doubt after lawyers warned it was […]
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Those who test positive likely to struggle to get life and mortgage protection cover
Concerns: Michael Dowling fears some people will be unable to take out life cover People who test positive for Covid-19 may struggle to get life […]
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How to navigate the property market during the pandemic
These are testing times. Covid-19 has reached into every sector, including the property market, and everyone is scrambling to adapt to the challenge. For those […]
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State may need to ramp up spending to €34bn
Employers’ group Ibec and trade unions have called on the Government to step up payments for workers and companies in response to the economic damage […]
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No hit to credit record for those who get mortgage break off bank
A deal is being hammered out between the Central Bank and main lenders so people who avail of a Covid-19 mortgage payment break will not […]
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Temporary ban on all evictions is to be introduced for duration of coronavirus crisis
The Government has confirmed that a temporary ban on evictions and rent increases will be introduced for the duration of the Coronavirus crisis. Housing Minister […]
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€32m debts written off by court in three days
More than €32m in personal debt has been written off this week under insolvency arrangements approved by the High Court. The huge sum relates to […]
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€2m debt write-off for publican approved
The High Court has rejected objections raised by a vulture fund to a personal insolvency arrangement (PIA) writing off €2m in debts owed by a […]
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Chasm between values of new and second-hand houses
A growing chasm between the values of new and second hand homes has been highlighted by the banking sector which says loans issued to first-time […]
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Dublin’s cool Northside moves ahead of stuffy Southside to hold the housing hotspots
Q Two northsiders are travelling in a car. The music is turned off and the windows are up. Who’s driving? A: The Garda. Q: How […]
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AIB drops fee for mortgage customers breaking out of fixed rate
AIB is allowing some customers to break out of fixed mortgages and lock into lower ones at no cost, in a move that is likely […]
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Ulster Bank fined €4.6m over data on mortgages
ULSTER Bank has been fined €4.6m by the Central Bank for failings around mortgage data it supplied to the regulator. The fine would have been […]
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Pressure now on more banks to cut their rates in mortgage price war
More banks are coming under pressure to reduce their mortgage rates after market leader AIB announced a number of reductions. The focus is now on […]
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Mortgage holders here still paying double Euro average
MORTGAGE rates in this country have fallen below 3pc for the first time in years. But there is scope for much deeper cuts, mortgage experts […]
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Revolution in fintech keeps the bankers awake at night
Shake-up: Revolut and other fintech firms are forcing banks to increase their tech focus I was more than a little surprised at the response I […]
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AIB was always going to lose battle – it’s just a pity it waited so long to concede
AIB was always on to a loser trying to defend its actions in denying 6,000 customers tracker mortgages. The bank tripped itself up and was […]
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The changes still needed to tackle the banks’ bad management cultures
Regulation: Unlike the UK authority, the Central Bank of Ireland does not have competitional law enforcement powers, an issue which deserves to be reconsidered Banking […]
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Paul Joyce: Mortgage arrears have been ignored but not solved
Housing, homelessness, and healthcare have justifiably dominated the election so far. But one aspect of the housing crisis, however, that has received little attention is […]
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Home truths: The story of Eoghan and the home hoovers
The big view on Ireland’s property market Whenever Eoghan Murphy is asked about his unforgettable term as Minister for Housing, one of the first things […]
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Typical household wealth has risen to €184,900 – but renters are losing out
The wealth of households has shot up due to rising property values. But renters have very little wealth, according to figures from the Central Statistics […]
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Most people unaware about credit card interest rate they are charged
The majority of Irish credit card users are unaware of the interest rate they pay, or how it is applied. And even those who say […]
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Fianna Fáil may have just pressed the pause button on the property market
The party’s new SSIA may cause a significant number of housebuyers to put their plans on hold for an unspecified period The man who is […]
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Court approves debt for equity swap insolvency arrangement
Decision is first to be approved by High Court involving a debt for equity swap The High Court has approved a personal insolvency arrangement (PIA) for a […]
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Record €60m debt write-off for former quarry operator gets High Court approval
A former quarry operator has had a €60m debt write-off approved by the High Court – the largest ever under personal insolvency legislation. Enda Patrick […]
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State-backed mortgage scheme hikes interest rates steeply despite bank cuts
The interest rate on the Government’s Rebuilding Ireland Home Loan product has been increased massively. Rates have shot up by up to 0.75pc at a […]
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Home truths: Big time housing promises without taxes are hollow
What can you get for €16bn these days? Well €16bn is the total amount estimated that Irish people will spend online this year. The Consumer […]
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One in 10 mortgage arrears cases involve separated borrowers – BPFI
Banking lobby group calls for State to introduce measures to help separated borrowers. About one in 10 mortgage arrears cases involve borrowers who are separated, […]
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In your pocket: Switching mortgage can bring major savings
Rates are falling and lenders are keen to offer better deals – it’s easier than you think. Up to 160,000 Irish families are out of […]
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Mortgage interest rates dip but remain more than double euro-zone average
Central Bank statistics show weighted average interest rates on new mortgages was 2.9% in November. Interest rates on mortgages taken by Irish consumers were lower […]
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New buyers pay €2,000 a year more than rest of eurozone
RIP-OFF mortgage rates in this country are costing new home buyers €2,000 a year more than our European neighbours. New figures from the Central Bank […]
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Pensions deliver decade-best growth of 20.6% in 2019
Zurich Life tops peers as funds recover from calamitous end to 2018. Irish pension funds delivered bumper returns in 2019, making it the best year for investment returns in […]
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Another year of dysfunction ahead for Ireland’s property market
Looming general election and UK-EU trade talks add to uncertainty for developers. With the new year now a week old and a raft of predictions […]
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Responsible Homeowners Betrayed
Thousands of responsible homeowners have been betrayed by the sale of their mortgages by PTSB into a bond fund which will be serviced by […]
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Revealed: Ireland’s most expensive streets and their €2m plus homes
Daily growth of €15m in value of housing stock fuelled by new supply rather than increasing prices, writes Wayne O’Connor A leafy Dublin street sandwiched […]
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Value of residential property in Ireland up by 5.3bn euro in last 12 months
SEVEN HUNDRED AND fifteen properties worth €1 million or more have been sold in Ireland so far this year, according to the latest Wealth Report from […]
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