Steep rise in applications for €1m mortgages

UP to 500 €1million-plus mortgages will be written this year as investors continue to try to cash in on the boom in property.

New figures suggest the number of individuals and couples taking out loans worth €1m-plus tripled in the second quarter of this year compared with the same period last year.

However, rising interest rates are forcing those trying to get on the housing ladder out of Dublin in ever greater numbers.

First-time buyers, however, are faced with a new obstacle to buying a home as lenders cut back on the amount they are prepared to lend to new entrants to the housing market.

This reflects rising interest rates which are undermining people’s ability to fund their mortgages.

According to figures released by the Mortgage Index from IFG Mortgages, applications for 1m-plus mortgages are rising sharply, while the average age for remortgaging is falling.

IFG Mortgages sales director Shane Connole said: “We are coming across an increasing number of individuals and couples borrowing more than €1m.”

Generally, they already have a significant level of equity creating greater security for both lender and borrower, he said.

The typical €1m-plus borrower, according to IFG, would be trading up to a €1.5m-plus property and carrying up to half of the value in existing equity, he said.

Key findings include:

Mortgage terms are getting longer, but there is little advantage in stretching the mortgage beyond 40 years

A 26% increase in the number of 30-year plus mortgages in Q2 of this year compared with 18% in Q2 2005.

Change is driven mainly by first-time buyers seeking to qualify for bigger loans to get on the housing ladder.

People are being forced to borrow for the maximum period as house prices refuse to fall.

The findings also showed that outside Dublin, mortgage volumes grew relatively strongly and were up 19%, in contrast to Dublin where volumes are actually down on this time last year, said Mr Connole.

Much of these increases reflect the growing trend of remortgaging, according to the report.