Michael Dowling: Purchasing first home could be back within financial reach

If more purchasers were aware of the First Home Scheme, the number of applicants would increase significantly. 

Amid the ongoing debate about the level of income a family needs to buy a family home, the latest figures from the Society of Chartered Surveyors Ireland suggest that a household would need an income of €127,000 to buy in Dublin, and would require an income of €85,000 in the North West. 

However, when you take into account the interventions that are available from the Government, the picture is somewhat different. 

That's because the introduction the First Home Scheme has revolutionised the ability of households on modest incomes to acquire a new property. 

The scheme was launched in July 2022 and to date, 699 homes have been purchased, with 6,376 people having registered their interest.  

I believe if more purchasers were aware of the incentive the number of applicants would increase significantly. 

Let me give you an example of the financial figures involved in the income and mortgage plans of a couple that I am advising, which suggest that the required income levels are about half of the quoted figures above.

The purchase price of the property under consideration is €425,000, the deposit required is €42,500, the First Home Scheme is worth €126,000, and the mortgage loan is €256,000. 

So, a couple or single person earning €64,000, with a 10% deposit can buy a new property that is worth €425,000. 

The average industrial wage is €47,201, which means buying a new home is well within the price range of a couple earning 68% of the average industrial wage.

Enhancements

Two enhancements to the scheme were introduced in 2023: In April, the Tenant Home Purchase Product was brought in, and the Self Build Product was introduced in September. 

The introduction of the Tenant Home Purchase option means that first-time buyers can acquire a second-hand property giving them the benefit of a first option to buy the property (under new legislation) where the landlord wants to sell and has served a notice of termination. 

I am amazed at the very low take up of this option: Only four homes have been bought in the last nine months.

While there are many critics of this scheme, it does work. With appropriate advertising and guidance, more buyers would apply. 

The scheme here followed on from a similar one the UK introduced in 2013 where 375,654 loans have been issued at a total value of £24bn (€27.7bn). 

If similar numbers in Ireland availed of the incentive, around 26,300 applicants would be able to own their first home. 

Britain is facing the same problems in assisting first-time buyers.

The Conservative government is looking to relaunch its own "Help to Buy” scheme in March, which is similar to the First Home Scheme in the Republic.

Good news on interest rates

There is also good news on the way this year for interest rates. Interest rates have ramped up to 4.5% since July 2022, but are now set to fall by up to 1.5%, in my opinion, by September. 

That will bring immediate relief for tracker mortgage customers, but also for borrowers who are looking for new fixed-rate mortgage loans or whose existing fixed-rate loans are coming to the end of their term.

A 1.5% reduction would save the average tracker customer €100 per month. 

There are a total of 70,000 customers coming off fixed interest rates in 2024. 

A significant cohort will face an increase in the available fixed rates, but the cheapest lender in the market, Avant Money has an excellent range for borrowers who switch by the middle of March. 

• Michael Dowling is managing director of Dowling Financial