House prices for first-time buyers rise by 10.8%

RECORD levels of personal debt and an impending rise in interest rates will put additional pressure on borrowers, a leading economist warned yesterday.

The latest figures from Permanent TSB/ESRI show the average price of a house has risen by 6.8% so far this year. First-time buyers were hardest hit, with prices rising by 10.8%. The average cost of a new house now stands at €266,899. The cost of a second house rose by 6.1% to €278,538.

Figures from the Central Bank, also released yesterday, show our total level of indebtedness continues to rise at an alarming rate.

Total private sector credit grew by 29.4% or €5.6 billion in October compared to 28.6% in September, despite a warning from the Central Bank about the risk to the economy.

The majority of the increase was made up of non-mortgage credit.

“Non-mortgage credit growth has been particularly strong over the last 12 months, accounting for 64% of the annual change,” the bank said.

Irish borrowers now have the second highest level of personal debt in the EU after Holland.

Austin Hughes of IIB Bank warned the rising debt levels and impending interest rate rise will put enormous pressure on borrowers.

That pressure will rise even further next year with the European Central Bank (ECB) expected to raise rates by at least another 0.5%. An overall hike of 0.75% in the cost of borrowing would add almost €1bn a year to consumer debt repayments in Ireland, according to Mr Hughes.