First Time Buyers, Do you have a 20% Deposit?

Posted on 8th October 2014 by Stephen Hamilton

Wonders never cease in the world of mortgages and finance.

Yesterday the Central Bank of Ireland took the first steps in an unprecedented move that will see new mortgage lending restricted to 80% of the property purchase price. This basically means that prospective First Time Buyers will need a 20% deposit, up from the current norm of a 10% deposit. So for an average 3 Bed Semi-D with a sale price of 275,000, the new mortgage will be restricted to 220,000. Most First Time Buyers are just about coming up with a 10% deposit. The new rules of a 20% or €55,000 deposit, using the above example, looks like it is going to force many to continue to be reluctant renters. monopoly mortgages

Ailish O’Hora of the Independent.ie thinks the “Central Banks Plans Are Bonkers”

I tend to agree, there seems to be very little logic behind the Central Banks proposed new rules. The property market is overheating in Dublin but this is due to the lack of available family homes for sale and little to do with the availability of 90% mortgage finance.

In the past the Central Bank did nothing to stop irresponsible lending. I personally do think new rules are necessary to prevent banks going back to 100% mortgages. However a much better idea would be to cap lending at current levels. I cannot see a problem with 90% mortgages, along side max lending, assessed on solid incomes and stress tested mortgage rates. Why not cap lending as it is instead of making things almost impossible for most young first time buyers?

The Central Bank have quoted other countries where similar rules have worked, however Ireland is not other countries. We do not have a stable rental market and young families prefer to own their own home rather than rent. The Central Bank really needs to analyze and assess what is needed here in Ireland. Simply copying what some other countries are doing, just for the sake of it, without any proper analysis of what is needed, here in this country, is indeed Bonkers!

One consequence of the new rules will be a bigger burden on parents. At the moment some first time buyers just about scrape together a 10% deposit, sometimes helped by parents, sometimes not. A 20% deposit is a much bigger ask. Will we see a return to Credit Unions and other short term lenders to raise the bigger deposits? Will parents get into debt to help their siblings get on the property ladder?? Is the Central Bank creating new problems and solving nothing?

Anyhow looks like the Central Bank are intent on bringing in the new rules, regardless. Here at MortgageLine we are prepared for the frenzy that these new rules are going to create in the short term.

If you are worried about getting a mortgage in the near future then please do not hesitate to contact us. We will be happy to help. Please use the comments below, send us an email or pick up the phone and give us a call on 01 707 9880.

Posted in: Dealing with Debt, First Time Buyer, House and Home, Mortgage Interest Rates, Mortgages
Tagged: Buy or Rent, Economy, First Time Buyer, Mortgage Advice, Mortgages, Personal Debt

sky

This is a nonsense. It is a real corruption. They looking for them selfs. Politicians and bankers buy property all over country , kicking out families and punting rent high and making in possible to by a house for family. HIS COUNTRY GOING BACK UNDER LAW OF A LANDLORDS. 300000 HOUSE 60000 DEPOSIT 68000 salary – its 32 euro per hour , how many people can get this if minimum is 8.65 + a huge unemployment . It is mafia.
- Stephen Hamilton
  
  thanks for your comment. Fingers crossed that at least some of our politicians will stand up for young first time buyers
Olga

Further diminishes young families ability to set down roots in Ireland, why invest in a country that is unwilling to invest in you?
- Stephen Hamilton
  
  thanks for your comment Olga. I hear you. It really is a very frustrating state of affairs
sinead

Completely ridiculous… we are a young family, renting the same property privately for a number of years now. We have proven to the banks that we complete all their requirements – ability to repay (proven track record of rental paid = mortgage payment), extra savings on top of that, 2 incomes etc…. just when we think we might finally be in a position to start getting our 10% together (we figure another 2 years of savings) we will be hit with this increase in deposit – meaning a further 4 years of savings at least on top of the 2 we already calculated….. and yet this does not take away from our ability to pay a mortgage!!! we’ll never get on the property ladder at this rate. Earning too much to go on a council housing list and not enough to put together a 20% deposit.!! So disappointed with the path that my beloved country is following… looks like emigration may be only key to securing roots for my family anywhere. 🙁
- Stephen Hamilton
  
  thanks for your comment Sinead, I sympathize and agree that the new rules are ludicrous. We have many customers in more of less the same situation. At the moment these new rules are looking pretty nailed on unfortunately.
  
  I think people need to start hunting down their local Fine Gael and Labour TD’s to put the pressure on them to stand up for young families in their area.
Ciara

Ive been doing my best to get a deposit together and its so difficult in this economy. This is just another kick to those who work hard in the hope of buying a home for their family.
- Stephen Hamilton
  
  thanks for your comment. Yes the regulators seem to be again causing problems rather than solving them
Don´t have the 20%, sorry.

So that’s the way the politicians have for helping young people to leaver their parent’s home, go and live on their own and have a family? I guess that people with properties and already rich will be delighted to see that they won´t have more competence, the people won’t be able to buy so they will continue renting …. so …. let´s increase (again) the rents in Dublin!!! C’mon!! let´s continue charging 300 euros for sharing a bedroom with 3 people in city center! well done guys!
DD Hamann

Well,its quite harsh,and I agree its a lot of money to be saved.But same time a lot of irish people prefer to spend their money in pubs,clubs e.t.c.and living (if there are so lucky) with their parents till they 30-40 years of age,and crying about hard life,instead of working harder and counting their pounds and making proper plan to get on the property ladder.
- Olga
  
  Please do not paint everyone with the same brush!! I work hard, do not go out drinking in pubs never mind clubs! I have been living away from home since the age of 18 and being in my mid twenties have paid over 50k in rent…while trying to save for a mortgage. But knowing I wont be able to do any of the things that my peers are doing for another 5 years to save the remainder 10% for a deposit is killing me! This will drive a lot of younger people to emigrate as they wont be able to see themselves settling down and having a future here!
  - Stephen Hamilton
    
    There are of course some out there who spend every penny they have with little or no thought for the future but in my experience there are far more who work hard, save hard and rightly expect a decent future for their families.
    
    80% mortgages will only help investors and speculators as rents are driven higher because young families cannot afford to buy their own home.
    
    Anyone affected by this really need to speak to (put pressure on) their local Fine Gael or Labour representatives.
    - George
      
      “Anyone affected by this really need to speak to (put pressure on) their local Fine Gael or Labour representatives.”
      Are you serious???
      The Central Bank is an independent body. Politicians have no power to influence the Central Bank`s decisions!
      - Stephen Hamilton
        
        The central bank is of course an independent body. Although it’s debatable if it has always been so in the past,
        
        Politicians on the other hand are supposed to stand up for the interests of the people and this move by the central bank does noting to help the people.
  - DD Hamann
    
    Well,I agree that 20% is very hard to save.I have been working myself like maniac for the past 13 years,paid in rent about 68k Euros,,saved x amount of cash,been lucky (in some ways) not to have kids (otherwise,not a chance to get mortgage approval),and got my house only 2 months ago,after been hunting for the past 14 months.Wishing you the best of luck to find ways and get yourself on the property ladder.Sin a bhfuill.P.S.Funny enough,I am an immigrant myself.
Ruth

Im a single person how the hell would I ever get a 20% deposit 1st time buyers should be exempt and it should be from 120k up that the new rules apply, iv worked my arse off for years to get my 10% and now I have to do it all over again, whos to day in another few years they wont make it 30-40%
Mary

Very stressed about all of this. We have 10% deposit paid (with savings) on a new build due for completion next year. Foundations are due to go down next week so this whole debacle has got myself & husband completely stressed out. We have full loan approval but of course this will expire in December before the house is complete. I presume the bank are well within their rights to refuse to re-approve in dec despite us having committed financially already?
Jakub

In my opinion Central Bank should rather create initiatives to increase supply on the property market than cut the demand through regulatory action. Once again, it look like the regulator seeks a temporary solution that will hit less privileged instead of permanent sustainable model. The proposed 20% deposit requirement will not only put first house purchase beyond reach of many young people who may choose to look for better life opportunities abroad but contribute to halting the recovery of construction industry.
- Stephen Hamilton
  
  thanks for your comment. Yes absolutely. I totally agree. The 80% LTV restriction will punish first time buyers and also make sure there is no incentive for builders to start building the family homes that are badly needed in Dublin and surrounding areas.
JACK

THEY’RE OBVIOUSLY TRYING TO STOP CARNAGE AGAIN—GOOD LUCK TO THEM. IF YOU CAN’T AFFORD A HOUSE DON’T LUMBER YOURSELF TO BUY ONE!
- Stephen Hamilton
  
  thanks for your comment, I hear you (no need to shout!)
  
  The new rule, if implemented, will indeed have a negative affect on the property market, in the short term and that in itself is not a bad thing. However the real issue, the lack of family homes in Dublin and surrounding areas, is not being addressed.
  
  Unfortunately the new mortgage LTV’s will put First Time Buyers at a disadvantage to investors. I think any rational thought process would never seek to put investors and speculators at an advantage over the family unit. Irish Society needs stable family units who can put down roots and be productive members of the economy.
  
  Putting investors and speculators at an advantage cannot be a good idea in the short or long term.
  
  The Central bank has quoted examples of other countries where restricting lending to first time buyers works. However in those example countries you have a rich minority who own the majority of the properties. The rich get richer on the back of hard working families. Is this really the kind of country we want?
  
  Thanks a bunch if it is but I for one am hoping that somebody wakes up and smells the cornflakes!
David

Stephen the requirements for a self build mortgage differ to that of buying real estate, with the regulations to be set by the Central Bank how will this affect the requirements for self build mortgages or is it a 20% required across the board?
- Stephen Hamilton
  
  Like everyone else I don’t know yet exactly what’s going to happen after the consultation process. However my take on it would be that it will not affect self-builders too much. I would say that the 80%LTV will apply to the value on completion for self builders. Most properties, especially if you already own the site, can be built for <80% of their final valuation.
nuls

at this rate i will never be able to buy
- Stephen Hamilton
  
  thanks for your comment. Yes it is going to make it nigh near impossible for the majority of low and middle income families to buy a home.
  
  An average Dublin home is going to cost at least 300,000. This means under the new rules you will need a 60,000 (20%) deposit. Going on current low bank deposit rates, you would need to save 1,250 per month for 4 years to accumulate this sum. However in 4 years time, if prices continue to rise (even at a modest rate), you will need more than this.
  
  Very hard to see how a family could save 1,250 per month for 4 years, on top of rent, high taxes and other essential living expenses.
  
  Seems like the Central Bank wants to put the goal of owning your own home out of the reach of the average family.
Brian

Am i correct in saying that for a self-build mortgage there is a 20% deposit requirement?
- Stephen Hamilton
  
  no thats not correct. Different lenders have different rules and LTV requirements. However it is possible to get 90% for a self build. The new central bank rules may change this but nothing concrete on that yet.

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