juillet 2, 2022

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Mom and Dad’s bank lends millions to first-time buyers

The bank of the mother and father plays a large role in financing the purchase of homes for the sons and daughters.

Research shows that four out of 10 first-time buyers are given money to help them build a deposit to buy a home.

In the first half of this year, the total value of gifts from families to buyers towards deposits amounted to about 210 million euros.

Approximately 150 million euros of this amount went to first-time buyers, and the rest to move buyers.

The typical new buyer has now made a deposit of more than €52,000, according to the latest housing market monitor from the Association of Banks and Payments in Ireland.

Many buyers use their own savings, but the role of parents who help with deposits is seen as very important.

The savings are four times greater than gifts, totaling about 795 million euros for new buyers and movers, according to lobbying bank calculations.

For moving buyers, money from an inheritance and proceeds from the sale of a previous property are important sources of deposits.

The average deposit for a moving buyer is 135,000 euros.

Buyers are under pressure from a shortage of new and used properties to buy and from rising prices.

This means that larger deposits are required.

And having to pay record rents impairs their ability to build a deposit.

Central bank rules mean that first-time buyers need a deposit of at least 10%, unless they can get an exemption.

There are also limits related to income About how much people can borrow.

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Last week, the central bank said it would adjust the lending rules process. It will allow lenders to carry over any unused allowance from one year to the next.

Banks are allowed to lend a percentage of the money outside the rules.

Average property prices rose 12 percent in the year to September, with prices in Dublin up 11.5 percent.

« It appears that rising home prices are driving the deposit amounts, » said Brian Hayes, chief executive of the Federation of Banks and Payments.

Home price growth has accelerated in recent months mainly due to the imbalance between supply and demand. He said supplies have been severely affected by the pandemic.

In contrast, lower-than-expected supply due to the pandemic in 2020 and 2021 has put more pressure on average prices.

Affordability is becoming challenging, Hayes said, with average rents also hitting their highest levels. Rents are more than a third higher than their 2008 peak.

Annual housing production was flat last year and this year, but is expected to rise significantly next year.

There has been a recovery in start-up activity, particularly since April 2021 with the full reopening of the construction sector.

« However, cost inflation is likely to play a role in averaging price developments in the short term, » Hayes continued.

Last week, banks said just over a quarter of first-time buyers were aged 30 or younger last year.

This contrasts with 2004 when six out of ten people who took out a mortgage were under the age of 30.