Report: House buyers paying less for mortgage

The average first-time house buyers are paying a smaller proportion of their wages in mortgage repayments compared with a year ago, according to a new report.

Figures released by the EBS/DKM Affordability Index reveals the trend will continue to improve throughout the course of 2008.

The average first-time working couple were spending 8.8% less in mortgage repayments in December 2007 compared with December 2006. As a percentage of their net income, their mortgage repayments had fallen from 26.4% one year ago to 22.6% last month.

The index measures the amount paid by a first-time-buyer couple, assuming each is on average earnings, buying the average-priced new house, and that their mortgage is worth 90% of the value of their property.

EBS and DKM say the index, published in Irish Property Buyer magazine, takes account of changes in European Central Bank interest rates now on hold at 4%, mortgage relief, house prices and rises in average earnings.

They point out that average house prices fell by around 6% over the year, while Brian Cowen’s budget changes in mortgage relief also affected the figures.

The past year saw many first-time buyers staying out of the market, with many waiting to see if the winner of the general election delivered an immediate change to stamp duty. This decision by many to wait contributed to quite a significant slowdown in the market; however, it did have a positive impact on rental yields.

Ms Dara Deering, of the EBS building society, predicted that house prices will continue to “ease back” this year by some 5%.

“I would expect to see this trend reverse in the second half of 2008 with the period of interest rate stability and a lack of further price increases encouraging buyers back.”

It is expected that housing completions will be in the region of 55,000 to 60,000 units in 2008 — enough to meet the demand of new buyers entering the market.

Garreth Murphy, editor, Irish Property Buyer, pointed out that since the start of the year, mortgage interest relief has been upped for first -time buyers.

Published courtesy of The Evening Echo