Nine out of 10 first time buyers get parental help
From government equity lending schemes to the Bank of Mum and Dad, would-be homeowners need all the support they can get
First-time buyers are driving growth in the mortgage market, yet for those trying to get a foothold on the property ladder it can be less of a small step and more of a giant leap.
The truth is that many still won’t reach the first rung without a leg-up from either the state or a parent — and sometimes both. Bank of Ireland said the average loan-to-value on the first-time buyer mortgages it wrote last week was just 76 per cent, suggesting that the new generation are Olympic-grade savers or benefiting from massive handouts.
Michael Dowling, managing director of Dowling Financial, says the biggest obstacle of all for first-time buyers is lack of supply, particularly in the second-hand market. “There are, give or take, about two million properties in Ireland and at the last count only about 0.6 per cent of the second-hand stock was for sale,” he says. “We should have at least 3 or 4 per cent for sale at any given point.”
Lack of supply, of course, equals inflated prices. Dowling says that most of his first-time buyer (FTB) clients have good jobs and savings. “They have done everything you could ask them to do, yet when they find a property they like, they are competing with other FTBs for it.”
One couple he advised recently, for example, had a combined income of €140,000 and a large deposit. They found a three-bed house in the area they liked, priced at €595,000. “Within two weeks that property had hit €690,000, and they were out at €675,000,” Dowling says. It subsequently sold for more than €100,000 above the guide price. Loan approvals typically last only six months, or sometimes a year, so many first-time buyers in this boat are having to renew their approvals.
A report from the Society of Chartered Surveyors of Ireland late last year said that a couple wanting to buy an average new three-bed semi would need a combined salary of €127,000 — far higher than the national average salary of €45,000 per person.
As noted by Martina Hennessy, managing director of Doddl, saving a 10 per cent deposit plus another estimated 2 per cent for transaction costs, stamp duty and legal fees can also be “extremely difficult” for the typical first-time buyer.
State help
The two main government schemes for first-time buyers looking at new or self-build homes are Help to Buy and First Home. The first helps people with a deposit for a new or self-build home with a four-year income tax and Dirt refund. The most you can claim is €30,000, 10 per cent of the purchase value, or the total income tax and Dirt paid in the previous four years, whichever is lowest.
You will have to repay this only if you fail to buy or complete the home, or don’t live in it for at least five years after your application is successful. You can apply via Revenue’s MyAccount or Revenue Online Service (see revenue.ie for details).
In the First Home scheme, meanwhile, the state puts up as much as 30 per cent of the purchase price of a new or self-build — or 20 per cent if the buyer is also using Help to Buy. The maximum amount available is subject to price ceilings depending on location. In return, the state owns equity in your home.
To qualify, you need to have saved up your 10 per cent deposit, or got it via Help to Buy, and be getting the maximum mortgage possible based on your salary. You must also have received mortgage approval in principle.
There is no charge for the first five years. After that you are liable for an annual service charge of 1.75 per cent of the amount paid by the state. From year 15 this increases to 2.15 per cent and from year 30 to 2.85 per cent. You can pay as you go, or defer until you sell, die or move out. You can also buy the state’s equity share back sooner if you have the funds.
Note that while the state’s share in your home will remain static, should the value of your home increase, the amount you must pay to buy it back will also rise. For example, say you receive €30,000 and cede a 10 per cent stake in a home worth €300,000 today. If in a few years’ time your home is worth €350,000 and you wish to buy back the state’s stake, it will cost €35,000. See firsthomescheme.ie for details.
Hennessy says that the First Home scheme can “significantly increase” the buying power of a first-time buyer. “It also increases affordability as, unlike a mortgage, there are no standard monthly repayments,” she adds.
Given that the average sum provided under the scheme is €66,000, Dowling says that it means some first-time buyers can shop for properties “in a location or price range they wouldn’t otherwise qualify for”.
Take a first-time buyer on the national average salary of about €45,000. As Hennessy notes, according to Central Bank of Ireland rules, they could get a mortgage of €180,000. If they secured €30,000 under the Help to Buy scheme and €45,000 under the First Home scheme, in return for a 17 per cent stake, they could buy a new home for €255,000. “The First Home scheme amount could be reduced if this purchaser had savings to contribute,” she adds.
Dowling says that, while the schemes have been a success, he is not convinced that they target those who really need the support. “Look at the number of people who don’t borrow 90 per cent of the purchase price under the First Home scheme; for example, over 20 per cent who avail of the scheme only borrow 70 to 80 per cent, and 25 per cent between 80 and 90 per cent. So I’d argue that in some cases it is geared to people who don’t need the support.”
These schemes are also not available to those buying second-hand homes.
Parental help
Gifts from parents are still very common among first-time mortgage applicants, Hennessy says. Taking the above example, if the first-time buyer had, say, €20,000 in savings and a €25,000 gift from a parent, while their maximum mortgage would still be €180,000, they could get €95,000 under the First Home, allowing them to buy a house for up to €320,000. They would not qualify for the Help to Buy scheme as the loan-to-value ratio would be below 70 per cent.
Dowling says that, while most first-time buyers he meets already have their own deposit, parents often step in — particularly in situations like that of the couple mentioned earlier, who were outbid — rather than see them lose the house they want. “Or you’ll get parents who decide they’d rather give their child €50,000 to reduce the amount they need to borrow, especially given the poor returns on deposits. Either way, parental support features prominently.
“Probably nine out of every ten FTBs I deal with are getting some kind of help from a parent, whether it’s €10,000 or €100,000,” he says.
Other schemes
There are a couple of other supports for struggling first-time buyers, including the local authority home loan and the local authority affordable purchase scheme. The first is a mortgage from your council. You can borrow up to 90 per cent of the cost of the home, with limits depending on where you are located. Interest is fixed at 4 per cent for up to 25 years, or 4.05 per cent for up to 30 years.
The second offers homes priced at a discount from market rates, in return for which the local authority takes an equity stake to match the percentage discount you received.
Homes become available only periodically, however, and usually have a short application window. Many councils have no homes available at the moment. However, south Dublin county council has started accepting applications for its affordable housing at Foxwood Barn. About 14 homes are available, at discounts of about 22 to 29 per cent on market value.
News by thetimes.com, (Eithne Dunne).
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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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