New figures from the banks show the number of people approved for a mortgage was down 10% in October compared with the same month last year. Lending rules imposed by the Central Bank have taken the “froth” out of property market, the Bank’s chief economist said. These rules include having to find 20% of the property value as a deposit and having a maximum threshold of 3.5 times both borrowers’ annual incomes for mortgage eligibility.
But mortgage experts claimed the lending rules were leading to a situation where only the sons and daughters of rich parents were now able to afford a deposit to get approved for a mortgage with new figures from the banks showing the number of people approved for a mortgage was down 10% in October compared to last year’s month.
Central Bank economist Gabriel Fagan strongly defended the lending rules when speaking at a property conference.He said the early evidence suggested the measures were cooling the property market. “Tentative evidence suggests that the measures have had a positive effect of removing ‘froth’ from property prices, particularly in the Dublin residential market. This is confirmed by the slowdown in price dynamics and evidence from the Central Bank survey of the house price expectations of property market professionals.”
John Lowe the Money Doctor said young couples with families were unable to meet Central Bank rules on the size of deposits needed to qualify for a mortgage, particularly those in Dublin ” I defy any young couple to be able to save 20% of the average priced home within even three years – you are talking about saving a net € 20,000 each year. That’s around € 40,000 gross salary. Each year. Young people need help.”
Trevor Grant of the AEMA (Association of Expert Mortgage Advisers) called for a review of the rules. He warned: “Without a review of the rules, we expect the first-time buyer Dublin market will be dominated by adult children with rich parents.”
A total of 2,588 people were approved by banks for a mortgage in October, down 268 on the total for the same month last year, figures from the Irish Banking and Payments Federation show while there is a marked reduction in the numbers of people who can realistically expect to be able to get a mortgage in the coming year.