Schemes offering greater scope to buy, with very good schemes for new builds
Local Authority Loans are likely to increase in popularity doubling in numbers over a decade to 2018 according to Department of Housing data showing that in 2018 alone, a total of €224.7m of loans were approved across 1,165 approvals, at an average value of €192,875 per loan.
Standard restrictions on borrowings, typically at 3.5X multipliers on either single or joint incomes aren’t necessarily fixed in stone.
And, funnily enough, it’s a bit of an anomaly that those on lower levels of income can make use of other buyer initiatives to get around them.
Right now, a borrower or couple with an income of €55,000 will max out their mortgage borrowing capability at €192,500 under the Central Bank’s macroprudential rule, leaving them well shy of properties in the broad c €300,000 price bracket.
However, using various initiatives and supports, especially for new builds, there is scope to buy still, says Eddie O’Driscoll, a director of estate agency Auctioneera.
Let’s start with the Help to Buy initiative, where buyers can get a rebate back on income tax paid in this State, which can give them back €29,000 which they can use as/towards a deposit, depending on their existing level of savings.
Adding this rebate to their approved-in-principle €192,500 mortgage at three times €55k salary gets them to €221,500. But still, they are almost €70k shy of the €300,000 price range home they’d like.
They'd be a long time saving to close a gap of that size, especially if renting: it would be all but nigh impossible.
But watch out for the First Home Shared Equity Scheme, which is due to be launched in the coming months under the Government’s Housing for All range of initiatives.
This Shared Equity measure will see the State and/or participating banks lend the €68,500 to the couple to close the gap, with no interest or capital payments due for the first five years.
After that, interest-only payments at low rates kick in, while the lender/government has an equity stake of 23.6% in the property. The individual borrower/couple is able to buy out this stake when they want/can. Or, if they sell, that 23.6% of the sales price goes back into the shared equity pot via the original lender.
Notwithstanding the argument that schemes such as this, while enabling some categories of buyer (and it’s only for new builds), may cause even further price inflation, it’s likely to prove popular, even if most aspiring buyers would rather own 100% of their homes from the get-go, via a mortgage.
Then, separate to the First Home Shared Equity move is the availability of Local Authority Home Loans, to applicants whose single or joint salary is less than €65,000 pa.
In this case, a couple can borrow €288,000 at a fixed rate of 2.745%, over 30 years, equivalent to 5.2 times their salary: (Calculation tables and eligibility criteria can be found on https://localauthorityhomeloan.ie,) and the Help to Buy top-up rebate of €29k gets them comfortably over the €300,00 property price threshold, if they are buying a new build.
Commenting, Auctioneera’s Mr O’Driscoll admits that the State-backed scheme offering low, fixed interest rate loans for amounts in excess of the 3.5 times salary cap that applies to commercial banks “does seem paradoxical and counter-intuitive, that lower earners are allowed to borrow a higher multiple of their salary.” If buying a new-build at, say, €290,000, monthly mortgage repayment would be in the region of €1,000, less than rents in many cases.
Local Authority Loans are likely to increase in popularity doubling in numbers over a decade to 2018 according to Department of Housing data showing that in 2018 alone, a total of €224.7m of loans were approved across 1,165 approvals, at an average value of €192,875 per loan.
“Meaningful sums are being approved each year; the money appears to be there for those who apply for it,” notes Mr O’Driscoll.
In addition, if willing and sufficiently canny, buyers on a low income (the €55,000 joint income is close to the Living Wage on a couple both doing a 40-hour week) can also help their budgets if they chose to Rent a Room (or two) at up to €500 a month free of income tax.
While a number of other estate agents report doing sales to buyers via previous or existing Local Authority loans, a number says the process can be slow and cumbersome, Auctioneera’s Eddie O’Driscoll claims “being able to circumvent the restrictive 3.5 times salary cap is the difference between being able to buy and not for many, so the Local Authority Home Loans are clearly crucial.”
Data from the Department of Housing shows that the number, and in particular the value, of loans being approved has increased dramatically from 2018. In 2018 alone, a total of €224.7m of loans were approved across 1165 approvals. This is an average value of €192,875 per loan.
"Meaningful sums are being approved each year; the money appears to be there for those who apply for it," says the estate agent, urging home hunters to take advantage of schemes already in place, and being rolled out under Housing for All 2021-2030.
