First-time buyers are having to borrow more to secure a home as spending power falls, reports show

First-time buyers have less spending power than a year ago and are having to borrow more to secure a home, according to figures from two new reports on the Irish property market.

Data from Daftmortgages.ie, which is part of the Daft property website, suggests that a typical mortgage seeker has €11,000 less in savings to put towards a deposit than their counterparts a year ago. Daft said the findings were based on an analysis of more than 170,000 (81 per cent of them being first-time buyers) people who had submitted their buying plans on its website in preparing for a mortgage.

Separately, the latest figures from the Banking & Payments Federation Ireland (BPFI) show that the average mortgage drawdown by first-time buyers in the second quarter of this year was €263,312, up 13 per cent from a year earlier and the highest level since the BPFI began compiling this data in 2003.

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The previous high was €251,831 in the first quarter of 2008, just months before the global financial crash.

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Some 11,985 mortgages were drawn down between April and June, up 24.5 per cent on the same period of 2021. In value terms, the rise was 40.6 per cent to an aggregate total of €3.13 billion.

In June the volume of mortgages approved was up 14.5 per cent year-on-year to 5,960. In value terms, approvals rose by 30.6 per cent year on year to an aggregate €1.66 billion. Not all mortgages that are approved are drawn down by applicants.

Switcher mortgage activity grew by 74.3 per cent year-on-year to more than 2,600 loans, as homeowners sought out value in advance of the European Central Bank’s rate rise and cost of living issues.

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Daft said its analysis found that house hunters have €304,000 on average to spend on a home in the second quarter, which equated to some €27,000 or 6 per cent less spending power than a year earlier. It said asking prices increased by €30,000 or 9.5 per cent over the same 12-month period.

Paul Monahan, general manager of daftmortgages.ie, said the reduced spending power might be a “result of spending bouncing back” as pandemic restrictions were lifted or people “feeling the pinch due to the rising cost of living”.

Trevor Grant, chairman of the Association of Irish Mortgage Advisors, said the strong activity in the Irish mortgage market was being driven by the desire of buyers to simply find a home at a time when supply is constrained.

“The mortgage market continues to grow at a pace, with many potential mortgage holders more concerned by the need to find a home, than by the cost of living, inflation or mortgage interest rate rises,” he said.

He noted that the number of mortgage holders switching to a different loan was gathering momentum, probably driven by the expectation of higher variable and tracker rates from the ECB. “One of the biggest drivers of activity in the mortgage market is the increase in the number of those looking to switch, mainly looking to lock into a low rate/flexible fixed rate products.”