Mortgage affordability remains stable for average first time buyer but falls in Dublin - survey

Wednesday 14 May 2014 12.42
The affordability of a mortgage is due to fall but is still well below the peak recorded in 2006
The affordability of a mortgage is due to fall but is still well below the peak recorded in 2006

The affordability of a mortgage for first time buyers has remained broadly stable since the end of last year, according to the latest EBS/DKM Affordability Index.

A working couple would need to commit 19.3% of their net income to repay an average-sized mortgage, according to the report, in line with the same figure recorded in December 2008.

The figure is well below the peak of 26.4% recorded in 2006, however it is forecast to rise by 0.3% in the next month.

First time buyers in Dublin need to commit more of their income to their mortgage, according to the report, with an average of 23.7% dedicated to the loan’s repayment.

In the rest of the country, 16.7% of a working couple’s net income needs to be put towards their mortgage.

This was the result of the sharp rise in Dublin property prices last year, according to EBS and DKM, while prices elsewhere were largely static or down.

Meanwhile, an AIB/ESRI report on the state of the housing market found that potential buyers believe it is a good time to buy but remain cautious in their approach.

The AIB/ESRI Housing Market Index for the first quarter of the year found that 43% of people expect house prices to be higher next year, down slightly on the previous survey.

Respondents expect Dublin house prices to be 4.3% higher in the next year, while prices elsewhere will rise by 1.5%.

More than two thirds of those asked said their main reason for not buying at the moment was that they were satisfied with their current home.

Just 5.5% said they were not buying due to fears over income or job security.

However a majority - 62% - said they were worried about the future affordability of a mortgage, with a further 15% saying they were worried about rising interest rates.