If you missed Margaret Barrett, Managing Director of Mortgage Navigators, Interview last weekend on Newstalk with Jonathan Healy you can listen back now. Catch up on the interview now and take your first step towards homeownership
Now, if you are a first time buyer, you’re trying to get on the ladder. It’s a very, very stressful time.
And can you do it is the first question you’re always going to be asked. Margaret Barrett is managing director of Mortgage Navigator. She’s an experienced mortgage advisor and a qualified financial advisor.
And she’s with me now in our Republic of Work studio. Margaret, good morning. Good morning, Jonathan.
Lovely to have you in with us. Average rents right now are through the roof. There is a desperate clamor to get on the property ladder, but it’s very hard right now, isn’t it? Yeah, it is.
And I suppose, look, we have a bit of a perfect storm. As you say, we have extremely extortionate high rents. The average rent in Dublin now sits at 2113 and the average rent in Cork is 1386.
But I suppose we’re seeing rents higher than those figures. And we’re seeing rents as high as 2700 in the Dublin market and over 1700 in Cork. So it is the perfect storm.
And I suppose that is, I suppose, proof in the pudding that we have, as we well know, a property supply issue. But what’s now becoming apparent is that a very high mortgage is actually cheaper per month than the average rent. And I suppose, look, when we look at the Dublin market, we now know that the average purchase price of a three-bed simmy is now coming over 500,000, which is quite significant.
A first-time buyer can borrow 90%. So if we round that down, a purchase price of 500,000, a first-time buyer can borrow 450,000. And if we put that over a 30-year term and a green interest rate of 3.65, that mortgage repayment is 2058.
Which, that’s bananas that the rent is going to be way more than it was to get a mortgage. But people who are paying the 2400 can’t get the mortgage for the 2000. And we are stuck in this weird lacuna.
Absolutely, for sure. And I suppose we’re also seeing another, I suppose, step that’s coming through to compound that. So the median age of a first-time buyer is now 35.
And we’d have clients coming to us and they’re like, oh my God, I should have been on the property ladder years ago. And they could be in their late 20s, early 30s. And I suppose we now know that over 44% of first-time buyers are now over the age of 35, which is quite significant.
And if we look back to 2004, this was actually 17%. So it’s consistently rising year on year. And again, we also know that we have 68% of our adult children still living at home with their parents.
And I actually say for those people, they’re fortunate because they’re able to save. It’s the poor misfortune that’s in the higher rental sector is unable to save for that 10%. Somebody who is working in Dublin, who perhaps is not from Dublin originally, they have no choice but to pay these massive rents.
What would have been referred to in olden times as dead money, because you’re not getting anything for it. Is there any light at the end of the tunnel? Look, it is not all doom and gloom. And I suppose I want to absolutely reiterate that today.
So I suppose the good news is, is that in 2023, we had the highest mortgage drawdowns for first-time buyers since 2007 with 26,000 mortgages, right? So that’s positive. And we’re also seeing that I suppose mortgage approvals in the last quarter has increased by 10% as well. So I suppose, look, that’s an indication that first-time buyers still have borrowing power.
The banks are certainly open for lending, which is really, really positive. And we’re starting to see supply of property coming into the market. I suppose we know that 2023 ended with the highest housing completions in the last 15 years with over 32,500 houses.
But what’s really, really positive, Jonathan, is that in the last two months, 7,000 new dwellings have commenced in the first two months of 2024. And that’s really positive because it’s 72% higher than that. But we have shortfalls across the board.
We have shortfalls in rental accommodation. We have shortfalls in properties to buy. We have shortfalls for people to downsize if they want to do that or indeed to move up.
You know, until such time as we have a bucket load of new properties, we’re going to be stuck in this. If someone is starting out on the journey now, if they’re in their late 20s, early 30s, you know, they’ve squirreled money away. One of the most common factors a listener says, I’m only starting this process.
What are the common mistakes I need to avoid? Sure. And I suppose the very first thing I suppose, because we now have a cohort of people that are struggling for that 10% deposit, they need to become very, very familiar with the incentives that are available to them. So I suppose the biggest one is the help to buy scheme.
It’s still in place and it’s valid and it’s currently available until 31st of December 2025. So I’d advise all clients that come to us in our brokerage to log on to my revenue and figure out how much you can reclaim back on the help to buy over the last four years. The second scheme that is becoming very, very popular and is still very much available is the first home scheme.
And that’s a shared equity scheme, which is supported by the government. Again, that is to bridge the gap with the deposit and the purchase price of the property. Do you have to pay that back? I mean, how does it work? Yeah, so yes is the answer, but over a really long term.
So it has to be paid back over 40 years. It’s actually a very cheap form of finance. And I say this to all clients, there’s no charge up to the first six or seven years.
And then there’s a service charge, which is actually quite cheap, which is 2.67%. So it’s actually a very, very good scheme for a certain cohort of people. Then we thankfully, Jonathan, are seeing a lot of affordable housing schemes coming onto the market. And I suppose this is, I suppose these are actually really, really required to be quite honest, because they’re for incomes that are below the, as I say, we look at that 450,000 euro mortgage to buy that 500,000 property in Dublin.
We’re looking at a combined income of over 110,000. Which is absolutely insane. 100%.
And whilst it’s insane for a couple. That’s two people working, right? If you’re on your own, you’re trying to buy something, that’s a problem. If you have children and then there’s childcare thrown on top of that, it’s impossible.
It is absolutely challenging for sure. So I suppose those houses are coming on scheme and I suppose is to make yourself, I suppose, familiar with those because they’re under the county council. So we have them here in Cork City Council, Cork County Council.
We have them in Dublin under Fingal and they’re starting to come out. So we will see a significant supply of these houses coming out. So that’s number one, get familiar with the incentives available.
Then every first time buyer needs a lender approval. No auctioneer will speak to a first time buyer without the approval. So I suppose speak to a broker, you know, and I’m going to say a broker as early as possible.
And the reason I say choosing a broker is that a broker has access to all lenders. So whilst you mightn’t fit inside one certain lender’s criteria, there will be a lender available to you. There will be somebody.
If it’s not a bank, it could be another source of income that you might have thought about. Yeah, well, every bank has different, I suppose, credit policies and credit assessment criteria. So some banks are stress testing by 2%.
Other banks aren’t. Some banks have a certain threshold for net disposable income for assessment and other banks have different. So I suppose it’s finding the best lender for the applicant.
And I suppose, again, choosing the broker, I suppose we’ll work with you and we’ll ensure that we’re assessing you with the correct lender. But at that point, it’s only about figuring out what’s the max you can borrow. Please, God, you won’t need the max, but it is figuring out what the max is.
The frustration, though, will be for, and we’ve seen this particularly in the last two or three years, that you have so many people who have mortgage approval, but they cannot find the property. And by the time the property becomes available, it’s now more than their approval that they received for their mortgage and they have to go back and do it again. It’s almost a perfect storm for anyone doing this.
Yeah, it is. And I suppose, look, the good news there, though, is that the banks still have exceptions. And I suppose since the central bank increased the lending criteria from 3.5 up to 4, it has actually increased the amount of exceptions available to first time buyers.
So don’t be afraid. Again, your mortgage advisor will guide you here. So if you are short, every avenue is going to be checked for you.
I suppose the third thing that you need to do is you need to identify your location, wherever that location is, because once you decide if you’re buying a new build or a previously owned build, this really important thing is deciding where you want to buy. And you are becoming best friends with the auctioneers in that area. And I mean that.
Be nice to them. Be very nice. And make sure that they are aware that you are, I suppose, a fully approved buyer, that you are eager to purchase, you know.
And I suppose, and I say this to all our clients, sometimes you’re not looking for the house that has the for sale sign on it. You’re waiting for the house that is about to have the for sale sign. Yeah, and I suppose it’s that time and that relationship that becomes important.
Before I let you go, Margaret, I’m asking everybody, favourite Easter egg now? Have you a choice? Are you looking forward to what the Easter Bunny will deliver on Sunday morning for you? 100%. And favourite is Lindor. Lindor.
We thought Ferrara Rocher was high end earlier. Lindor is after upping its game. We’ll have to see what Gareth Mullins is talking about.
He’s on the way next. But for now, Margaret Barrett, Managing Director of Mortgage Navigators. MortgageNavigators.ie is the website.