Rising prices and less spending power means first-time buyers are worse off than a year ago

Daft Mortgages' general manager Paul Monahan says people buying their first home are having to borrow more cash — on which they will be paying a higher interest rate than heretofore. File Picture: Unsplash

First-time buyers hoping to purchase a home in the next six months are in a worse financial position than this time last year, with less spending power and rising house prices meaning higher mortgage repayments, a new analysis has found.

With average house prices rising by around €30,000 in the last year and less money for a deposit, those buying their first home this year could face paying an extra €700 a year in mortgage repayments as a result, according to the audit by daftmortgages.ie.

Couples seeking a mortgage have €15,000 (23%) less in savings than equivalent buyers a year ago, according to the analysis. Overall, house-hunters have €27,000 less spending power than a year ago, a reduction of 9%.

Paul Monahan, general manager at Daft Mortgages, said the reduced saving levels from 2021 to 2022 could be indicative of an increase in spending following the loosening of Covid-19 restrictions or may come as households are “feeling the pinch due to rising cost of living”.

'It’s more likely that the cost-of-living crisis will really exacerbate the housing crisis for first-time buyers,' said housing expert Rory Hearne. File picture: Niall Carson/PA

In the case of couples seeking to buy their first home, they plan to borrow 6% more on their mortgages to make up the difference.

“This will result in a €59 increase in their monthly mortgage repayments, making their repayments go from €872 to €931 per month,” states the audit.

First-time buyer couples will spend an extra €708 on their mortgage repayments per year. 

The findings are based on data from more than 170,000 people who submitted their buying plans in preparing for a mortgage through the website in the second quarters of 2021 and 2022. Four in five were first-time buyers. People entered data such as how much they’re saving, earning, and how much they’re looking to borrow.

Daftmortgages.ie said its data comes from people who said they were looking to buy within the next six months.

Rory Hearne, an assistant professor in social policy at Maynooth University, said if people have less savings in the face of rising house prices, it means “it’s going to be more challenging” to get a mortgage.

“Some people will be locked out of even being able to compete,” he said.

“It’s more likely that the cost-of-living crisis will really exacerbate the housing crisis for first-time buyers. 

It’s crisis heaped upon crisis for those in generation rent. 

According to CSO figures, double-digit house price growth has been recorded since the middle of 2021, with prices rising in the year to May by 14.4%.

Forecasters predict property-price inflation may slow in the coming months given the ECB’s change in interest rates and the high cost of living.

This comes as the latest report from the Banking and Payments Federation Ireland shows that 11,985 new mortgages were drawn down by borrowers in the second quarter of 2022.

This is a rise of 24.5% compared to the same time in 2021.

The average drawdown now stands at €263,312, the highest level since the banks’ group began to compile these statistics in 2003. The previous record was €251,831 in the first quarter of 2008.