Fewer mortgages being given to younger people

Years of restricted access to credit have squeezed twentysomethings out of the housing market to such a degree they now account for fewer than 5% of mortgage holders, according to new research.

The past decade has seen the percentage of mortgage protection policyholders in their 20s dwindle to 4% of the market compared to 19% in 2004, data from Royal London shows.

As mortgage protection policies are almost universally needed before a home loan can be drawn down, the figures provide a good insight into changes in the mortgage market over that time.

“Looking at the mortgage protection policies that have been taken out over the last 10 years then it would appear first-time buyers are now mostly in their 30s rather than their 20s and people are trading-up in their 40s and 50s rather than their 30s and 40s,” said Royal London marketing manager Joe Charles.

“As mortgage protection cover is nearly always a requirement all lending institutions in Ireland insist on as a condition of mortgage approval, this study gives a good indication of how the profile of mortgage applicants has changed over the years.”

Some 41% of policies are now held by those in their 30s with a further 35% in their 40s. The data covers the decade up to 2014 and so does not take account of the Central Bank’s mortgage lending rules introduced in February 2015.

While the regulations could exacerbate the situation, it arose due to limited access to credit in the aftermath of the financial crash, Mr Charles added. The regulations brought in borrowing limits based on an 80% loan-to-value ratio and loan-to- income limit of 3.5 times a borrower’s annual salary.

“[The Central Bank mortgage rules] will have an impact now,” said Mr Charles. “Before the restrictions, people were just having problems getting mortgages anyway. The banks had curbed their lending so that was going to have a knock-on effect for younger people. Access to credit was fairly tight over the last couple of years.”

A range of societal factors may have also influenced the changing demographics of mortgage holders over the last decade.

“For some, it’s a choice or a lack of supply,” said Mr Charles. “For others, it’s the tightening of mortgage lending criteria which has meant that less people in their 20s are applying for and securing a mortgage.”