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Plan to give landlords tax deal in return for rent freeze.

The Fr Peter McVerry Trust and Ibec’s Property Industry Ireland have joined forces to endorse a plan to allow landlords treat property tax payments as an expense – in return for giving tenants a rent break.

Landlords would “opt in” to the scheme. After two years, if the tenant produces a letter confirming that the rent did not increase, then the landlord would get the extra tax benefits.

Landlords that sign up for a two-year rent freeze would treat property tax as an expense, and get full mortgage relief when filing a tax return.Landlords can only claim 75pc of the interest they pay on a mortgage against their tax bill following a budgetary change during the economic downturn.

Having children now comes before buying a home

Having a baby now comes before owning a home for a new generation that has little choice but to rent until their mid-thirties. Increased barriers to acquiring a home have raised the average age of Ireland’s first-time buyer by four years to 33. In 2005, the average first-time buyer in Ireland was about 29, but according to Real Estate Alliance (REA), this figure is up and still rising.

The newly emerging trend is more and more Irish couples are now starting their families in rental accommodation- a social shift which goes against the longstanding Irish tradition of buying your home first.

A combination of circumstances have combined to make it extremely difficult for young people to buy:

  • New Central Bank rules pushing up the deposit that must be saved for a house;
  • Returning emigrants finding it difficult to secure mortgage approval without a full year’s employment behind them;
  • The increase in contract work, as opposed to a “job for life”, making it difficult to get a mortgage;
  • A change in attitudes following the property crash and unwillingness to buy the “wrong” home.

Property prices rise nationally but fall in capital

The cost of buying a home has risen by more than 10pc year-on-year, but prices are falling in Dublin.

The Central Statistics Office (CSO) says residential property prices in the capital have dropped by 0.4pc in June, compared with a national increase of 0.1pc across the country.

And although house prices continue to increase, the rate of that rise has slowed down.It says that prices rose nationally by 0.1pc in the month of June, compared with 0.5pc in May and an increase of 2.9pc recorded in June of last year.

This is likely due to new rules introduced by the Central Bank in February which require first-time buyers to have saved 10pc of the property price, and second-time buyers at least 20pc, before they can secure a mortgage.

However, in Dublin, prices are falling, down 0.4pc last month. Despite this, prices are still 11.1pc higher than a year ago. The fall was more pronounced for apartments, which dropped 0.4pc, compared with 0.3pc for houses

Central Bank rules see easing off in mortgage approvals

The numbers approved for a mortgage in May have gone up, but at a slower pace than the same month last year.

This is due to Central Bank lending restrictions, experts said.

Figures from the banks show 2,461 potential buyers were approved for a mortgage in May.

This was up 20pc on the figure for the same month last year, according to the Irish Banking and Payments Federation.

Experts said this was slower than the rises in the numbers approved for a home loan earlier in the year.

In February the Central Bank introduced limits on lending, in a move it called macro-prudential rules.

Economist with Goodbody Stockbrokers Eamonn Hughes said: “The surge in mortgage approvals ahead of the implementation of the new Central Bank macro-prudential rules was always likely to result in a slowdown once the rules were implemented.”

Income limits causing ‘mortgage lockout’ for First-Time Buyers

Sunday Times article ; results of Mortgage Brain survey.

A new survey of brokers highlights that the income rules will provide a ‘killer blow’ for First Time Buyers (FTB) and not the deposits as previously expected by many analysts. This survey was carried out by Mortgage Brain Ireland, the team behind the IrishMortgages app. Some 200 broker companies were surveyed throughout Ireland. Brokers recommend increasing the lending limits to 4.0 or 4.5 times income.

 

The Loan to Income limits (3.5 times joint income) will be the real “killer blow for First Time Buyers trying to get on the housing ladder” according to Michael Quinn, Managing Director of Mortgage Brain Ireland. Some ” 48% of brokers feel that this income rule will have a high impact on the FTB’s ability to get a mortgage while another 40% of brokers believe there is a medium impact” according to Quinn.

 

Michael Dowling, a leading Irish Mortgage broker and chairman of Mortgage Brain Ireland said: “These new rules will directly impact First Time Buyers’ ability to purchase a home. The rules will likely put home ownership out of the reach of most young FTB’s unless they are earning a substantial salary. For example he points out that a couple who are now trying to buy a house worth €300,000 will need a deposit of €38,000 (12.6%) on a mortgage of €262k and this will require a joint income of €75,000.”

 

The new income limits (3.5 times joint income) will mean that the majority of public sector workers, and those on medium to low incomes, will not be able to borrow enough to buy a home in the city. This ‘mortgage lockout means that only white-collar professionals on high salaries will be eligible to borrow enough to match the high house prices in Dublin, Cork and Galway.

 

The IrishMortgages App survey asked Brokers their opinions on how we could improve the situation. Some 51% of brokers would recommend an increase in income multiples to 4.0 times income, while a further 33% suggested increasing this to 4.5 times income according to Quinn. In the UK the income multiple is 4.7 for single applicants and 4.5 for joint applications.

Bill proposes giving powers to Central Bank on rates

The Central Bank would be given powers to limit what interest rates banks could charge on variable mortgages, under legislation proposed by Sinn Féin.

The proposed legislation would give the Central Bank new powers to set out the maximum rate of interest that any of the five domestic banks could charge.

This restriction would mean that a new entrant to the market would not be discouraged by fears that their rates might be subject to control.

Sinn Féin has said the Government’s response to high variable rates has not been adequate.

Some 300,000 mortgage holders are paying among the highest variable rates in the eurozone.

The high cost of variables works out at around €300 a month more than the cost for a similar-sized mortgage in the rest of the Eurozone.

Young people are moving back home to save for a deposit

Thousands of younger people are moving back to their parents’ homes in a bid to save money for a deposit for a house, a survey has found.

The belief that Ireland is likely to follow Europe by becoming a nation of renters is widespread and particularly strong among the 18- to 24-year age group, the survey of 1,000 people found. Three-quarters of people in this age group believe Ireland will become a nation of renters.

But 70pc of all age groups believe that the expectation of owning their own home is now unrealistic.

And brokers have warned people not to be sucked in by “glitzy” offers like cash back and money for paying legal fees when it comes to choosing a mortgage provider.

More than a quarter of people between the ages of 25 and 34 said they had moved back to their parents’ homes to save for a deposit on a home, according to the survey commissioned by Aviva Home Insurance.

Mortgage-approval fall blamed on new rules

There has been a “stark” slowdown in the number of people being approved for mortgages, with Central Bank lending restrictions being blamed.

Figures from the Central Bank show that lending for house purchases declined at an annual rate of 2.6pc last month.A total of 2,130 people were approved for a mortgage for a house purchase in April, down from the figures for the previous month.

The average loan approval amount has aslo decreased- currently €188,900, down from €190,300 in March.

Mortgage lending up in first quarter.

MORTGAGE lending surged in the first three months of the year.

New figures from the banks show that more than 5,600 new mortgages to the value of €983m were drawn down by borrowers here during the first quarter of the year.

This was up 64pc compared with the same quarter in the previous year, according to the Irish Banking and Payments Federation.

The jump in lending prompted analysts to say the housing market recovery is underway.However, many of those having a mortgage issued to them had approval before new Central Bank lending restrictions were imposed.

First-time buyers account for more than half of the mortgages issued, with those trading accounting for almost four out of 10 mortgages drawn down.

The average loan size rose to € 175,016 in the first quarter, up 5.5pc on the previous quarter.

The true impact of new lending criteria on the market situation will become more apparent in the latter half of 2015.