House hunters being pushed into more debt as prices surge

First-time buyers are now getting the go-ahead from banks to borrow almost €15,000 more than a year ago. Stock photo: GETTY

Charlie Weston

Surging prices are forcing house hunters to get approval for larger mortgages.

First-time buyers are now getting the go-ahead from banks to borrow almost €15,000 more than a year ago.

House-price inflation means the average a first-time buyer couple have been getting approval for is €210,000, according to the banks.

Economists said new buyers were being pushed into borrowing more, as the numbers getting approval for a mortgage were higher than the numbers of houses being built.

A total of 3,970 mortgages were approved in July.

Just over half of these were accounted for by first-time buyers, according to the latest figures from the Banking and Payments Federation Ireland (BPFI).

The overall number of mortgages approved rose by 17pc year-on-year, but declined by 8pc in July compared with the previous month.

The figures from the banks show that when first-time buyers and movers are combined, the average approval amount is now €227,000.

This is up almost €11,500 on a year ago.

This was a rise of 5.3pc, far outpacing wage growth, which was running at between 2pc and 3pc, economists said.

Property prices are rising by 12pc a year.

Chairman of the mortgage committee of the Irish Brokers Association Michael Dowling said prices were rising so fast that new buyers were coming up against mortgage lending limits.

These restrict buyers to borrowing not more than three-and-a-half times their income.

The gap between the level of mortgages approved and the value of mortgages drawn down is widening.

This is due to the fact many first-time buyers get multiple approvals when searching for a house, while others are unable to use their mortgage approval as they can’t find a property they can afford.

The value of approvals was €8.4bn in the 12 months to June.

This exceeded actual lending of €6.5bn.

This means a gap of almost €2bn has opened up between the value of approvals and the amounts actually drawn down.

A key aspect of the data was how the number of approvals for first-time buyers continued to exceed additions to the housing stock, said Goodbody chief economist Dermot O’Leary (pictured inset left).

“Ongoing price inflation is inevitable as this money chases a limited amount of properties,” he said.

First-time buyers continue to be the fastest-growing category getting mortgage approval.

Separate data from the Revenue Commissioners shows that 4,752 Help-to-Buy applications have been approved since the scheme’s commencement.

“We are forecasting 30pc growth in gross new lending this year,” Mr O’Leary added.

“Although there is a gap opening up between approvals and draw downs due to limited supply, this looks achievable at this stage and will contribute to net lending growth in the banking system for the first time in eight years.”

Banks have approved €8.6bn of mortgages in the past 12 months.

This level of approvals was last seen in 2009, according to Conall Mac Coille, economist with Davy Stockbrokers.

He said speculation that the Help-to-Buy scheme may be phased out has not led to a surge in applications for the scheme.

Irish Independent

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