First time buyer couples nationwide are spending up to 25% of their joint incomes on mortgage repayments, while working couples in Dublin are spending up to 37%, according to a monthly EBS/DKM Affordability Index. The index is published by Irish Property Buyer magazine.
The Affordability Index tracks levels of affordability for working couples in order to monitor the increasing levels of debt that they are taking on as first-time home buyers. It takes into account changes in mortgage rates, changes in the levels of mortgage interest relief and increases in average earnings.
A look at the Quarterly Affordability Index reveals a similar trend to the monthly breakdown. It shows that working couples nationally are spending up to 28% of their joint disposal income on mortgage repayments, while working couples in Dublin are spending up to 25%. These figures compare with 24% and 29% respectively a year earlier.
The index says that while wage increases are alleviating some of the pressures on first-time buyers, the main factors responsible for the deterioration in housing affordability are hikes in mortgage rates and the continuing rise in house prices. Assuming that two further rate hikes are expected next month and in December, the repayment situation is due to deteriorate further.
'People are paying significantly more in monthly mortgage repayments than they were this time last year and when you take into account recent and expected hikes in gas and electricity prices, the message for home buyers is to think ahead, budget properly and to ensure that they do no take on a burden of debt that is too large,' commented Annette Hughes, Director, DKM Economic Consultants.
'Our research shows that 41% of first time buyers are very concerned about rising interest rates, with 40% saying they will change their lifestyle to negate potential future interest rates rises,' said Dara Deering, Head of Mortgages at EBS.
'Buyers should consider the long-term cost of their mortgage and should ensure that they are given calculations which reflect payments in year two and year three, not just year one,' she advised.
