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Wednesday, November 05, 2008
FIRST-TIME buyer couples can save €2,600 when purchasing a home compared with two years ago.
The EBS/DKM Affordability Index said the average working couple buying their first home is now paying around 20% of their net income in mortgage repayments, compared with 26% two years ago.
The main reasons for such a drop are increased mortgage interest relief and falling house prices.
The index also shows affordability for first-time buyers will continue to improve over the coming months.
The recent budget has resulted in a slight improvement in the circumstances of the typical first- time buyer couple, according to Annette Hughes of DKM economic consultants.
"While we estimate that the new income levy will reduce the average first- time buyers disposable income nationally by €404 per annum, after the increase in the standard tax band, the increase in mortgage interest relief, now available at 25%, will reduce mortgage repayments by €572 per annum from next year.
"Thus our first-time buyer couple is better off by €168 per annum. This increases to €259 per annum for the Dublin first- time buyer couple, reflecting the higher average house price in the area, " Ms Hughes said.
The index calculates mortgage repayments for a first-time buyer working couple, each on average earnings, in the initial years of their mortgage and is based on the assumption that the couple buys the average new house for the average price and takes out a 90% loan to value ratio.
It said that by the end of January next year, the proportion of net income required to fund a mortgage will have dropped to 18.8% compared with 22.4% in January 2008.
The improvement in affordability means a reduction in average monthly mortgage repayments of €275 or 21% between December 2006 and January 2009.
Director of membership business at EBS, Dara Deering said: "House prices are currently in line with those recorded in August 2005, with the average first-time buyer home costing €239,598 in September.
This trend in house prices looks set to continue into 2009. However, due to less activity in the market, current mortgage debt growth stands at 9%, compared with almost 30% in March 2006.
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