Borrowers now need a higher income to qualify for a mortgage during the Celtic Tiger property boom.
That increased the typical household income of first-time buyers to €77,000 per year, much higher than during the property bubble years.
In 2005, half of first-time buyers of new homes had an income of €60,000, according to the latest Mortgage Market Profile report from the Banking and Payments Federation Ireland.
Home prices are now within touching distance of levels seen during the Celtic Tiger property frenzy.
Due to Central Bank regulations on lending and the absence of mortgage interest relief, borrowers now require a higher income than in the asset bubble years to qualify for a mortgage.
The average or average income of first-time borrowers is now
€6,000 is more than the typical borrower would need to qualify for a mortgage in 2019.
More than half of new borrowers who bought new homes in 2005 had an income of €60,000.
About a third of the movers-buyers had this level of income.
In contrast, last year only 13 percent of new buyers had a household income of €60,000.
The report also shows that first-time borrowers are forced into higher debt levels than in property bubbles.
The average new buyer of a new home is now pledging €254,000.
This compares with an average borrowing of €237,000 in 2008, the height of the asset boom.
Movers are now taking out mortgages of €285,000, compared to an average home loan of €273,000 in 2008.
The share of first-time buyer mortgages with incomes over €80,000 nearly doubled between 2005 and 2021 to 39pc for older home buyers.
Wicklow had the state’s highest median household income for first-time buyers buying or building a new property.
A new buyer of a new property in Wicklow typically had a household income of €100,000.
Brian Hayes, Chief Executive of the Banking and Payments Federation, said: “With average home prices and loans returning to levels last seen in 2008, our latest Mortgage Market Profile report shows that new mortgage customers are no longer interested in buying homes. It requires more income than before.”
But he stressed that the mortgage market is very different now than it was a decade ago.
“Mortgage interest relief was available on home loans drawn between 2004 and 2012 and was instrumental in reducing home mortgage costs.”
In 2008 alone, home buyers benefited from mortgage interest relief of approximately €705m – tax relief on interest paid in the tax year on a mortgage.
And the lending limit introduced by the Central Bank in 2015 restricts borrowing based on income. In most cases, borrowers are restricted to borrowing three and a half times their income.
In 2008 first-time buyers were typically borrowing four and a half times their income.
Mr Hayes said: “This essentially means that new mortgage customers need more income than before.”
The report also shows that more borrowers are buying or building homes in the county where they live. However, this is not the case for Dublin borrowers, who are often buying in the commuter belt counties of Meath, Kildare and Wicklow.
This is due to higher income in Dublin than in other counties and the fact that home movers from Dublin can also benefit from high-value collateral.
