An extension of the Help to Buy (HTB) is crucial and it should be expanded to include all buyers of a primary residence – not just First-Time-Buyers (FTB). Such is the contention of experts at MyMortgages.ie who say that while it’s widely accepted that FTBs need the security that the Government financial support scheme will be extended past its December 2019 deadline, second time buyers have received less attention, with falling numbers in mortgage approvals for this group showing that they too are struggling.
Joey Sheahan, Head of Credit at MyMortgages.ie, explained the challenges they see families facing on a daily basis.
“There were 624 property purchases last year in Waterford by people who had previously bought a property, but who wanted or needed a new home. The average cost was €187,250. This means these homeowners would have had to get an average deposit of €37,450 together before they could buy. It’s this 20% deposit that is a major stumbling block for second time buyers. And we believe that if the HTB scheme was to be expanded to include those who may have bought a home in the past, but who now need to purchase a different primary residence, for whatever reason, then many more would be able to do so.”
The Nuances of Life
Mr. Sheahan said that, “It’s important to remember that not everyone’s life path is the same. Some couples do not qualify for FTB status because they may have bought properties several years ago before they met. Often these properties are small or in the wrong location, or simply not suitable for life as a twosome or a growing family. We are also seeing more and more families who have gone through several rounds of IVF – clocking up tens of thousands in medical bills. For these families, while their incomes may be stronger and so paying back a mortgage on a more suitable home would not be an issue – they simply don’t have the financial resources following their IVG journey to save the necessary 20%. We have seen many instances of this and its difficult – because these couples have been through so much already.”
The most recent figures from the BPFI show a falloff in second time buyer activity in the market. While FTB mortgage approvals were up 18.9% in the year to April 2019, mover / purchaser approvals actually fell by 0.8%.
2 IN 10 FIRST TIME BUYERS
MyMortgages.ie report that approximately 2 in every 10 FTBs they deal with rely on the HTB scheme – which supports the argument that the schemes end date must be extended in order to ensure the viability of Ireland’s property market, and to promote continued growth in mortgage lending.
Mr. Sheahan commented, “In 2018, 251 First Time Buyers in Waterford bought homes – given that we are seeing 2 in every 10 FTB avail of the HTB scheme, had it not been available, this may well mean that 50 or more of these FTBs would not have been able to get on the property ladder. If the scheme does not live past December 2019, we will certainly see a dramatic fall off in the number of FTBs entering the market next year.”
The HTB scheme enables a buyer to purchase a house when they have as little as 7% of purchase price saved – allowing 5% of purchase price, 1% towards stamp duty and another 1% towards legal fees. This means that first-time buyer can get out of renting and buy a home much sooner than if they had to come up with the full 10% themselves, which is difficult to save when also paying rent.
“The growth of new mortgage volumes has slowed – there are many people on good incomes that can’t buy a present because of a lack of houses at the right price and restrictive Central Bank lending rules. While we don’t want to go back to the crazy days when drawdowns topped €40bn, the current volume (at €9bn) seems too low to satisfy demand. €15bn would seem about right, but the cost of building houses is such that many developers are struggling to deliver homes for less than €300,000. The affordability sweet spot is between €250,000 and €300,000, but too many developments start above that and while the home buyers are on good incomes, the current Central Bank rules prevent many from qualifying, which is why they need this additional Government support.”
Source: Dungarven Observer
MyMortgages Limited trading as MyMortgages.ie is regulated by the Central Bank of Ireland.