Monthly mortgage repayments fall by €700

HOMEOWNERS are spending almost €700 less per month on their mortgage repayments, but experts said it has never been harder to get a home loan.

The latest housing affordability index shows that the average first-time buyer working couple is paying just 12.6% of their joint income on their mortgage compared with 26% three years ago.

The average monthly repayments in April were €644 compared with €1,323 in December 2006.

The index said that affordability will continue to improve for potential first-time buyers.

Experts expect net repayments for a couple to fall to 12.4% of net income by June.

CEO of the Irish Brokers Association Ciaran Phelan said even though the relative value of property has improved considerably, it is now very difficult to get a mortgage.

“Affordability has certainly increased in relation to mortgage repayments, but first-time buyers invariably need substantial savings to qualify for the mortgage.

“Demand is down because FTBs (first-time buyers) don’t have the substantial deposit required to apply for a mortgage, not because people don’t want to own their own home,” he said.

The EBS/DKM affordability index measures the proportion of after-tax income required to meet first-year mortgage repayments for a couple, each on average earnings with a 90% mortgage.

It takes into account mortgage rates, changes in the level of mortgage interest relief and is based on average earnings and new house prices.

EBS said so far in 2010 it has continued to see strong improvement in the number of first-time buyers applying for a mortgage, with around 2,100 applications received year to date, an increase of 50% on application levels for the same period in 2009.

Director of membership business at EBS Dara Deering said the society has started to see some variations on house price movements.

Mr Deering added that it is likely that regions will recover at different paces depending on the demand and supply factors within each area.

“The market is still contracting across the country as a whole, but there are pockets around Dublin that have seen house prices stabilise and certain properties in Galway are experiencing price increases.

“These kinds of trends are likely to become more commonplace as demand levels pick up,” she said.

Director of DKM economic consultants Annette Hughes said recent signs that the economy is stabilising are unlikely to result in a bottoming out of house prices just yet.

“It’s important to remember that a key risk going forward comprises the possibility of further increases in mortgage rates, as a result of the international debt crisis.

“Any increase in mortgage rates could impact confidence further and delay the return to stable house prices,” she said.