The Irish property market has been experiencing a surge in first-time buyer mortgage approvals, despite the country’s rising interest rates. In May 2023, a record-breaking 3,170 first-time buyer mortgages were approved, marking a 20% increase from the previous year. This is a remarkable feat, considering the economic challenges that the country has faced in recent years.
The driving factors behind these record-breaking mortgage approvals include a resilient economy and a shortage of rental properties, which is driving more people towards buying their own homes. Even with higher interest rates, first-time buyers are still able to qualify for mortgages.
These figures are a testament to the resilience of the Irish property market, and they suggest a positive outlook for first-time buyers in the future. In this article, we will explore the factors that have contributed to this trend, as well as the impact of rising interest rates on the market.
May 2023 Mortgage Approval Numbers
In May 2023, first-time buyer mortgage approvals in Ireland reached record highs, with 3,170 approvals, a 20% YoY increase, and a total value of close to €1.4bn. This surge in approvals is indicative of a resilient economy and a shortage of rental properties driving more people to buy, even at higher interest rates.
The figures from Banking and Payments Federation show a 31.2% MoM increase in first-time buyer mortgage approvals in May, making it the busiest month ever for first-time buyer mortgage approvals in both volume and value.
The increase in mortgage approvals is significant as it surpassed the €8bn mark for the first time since 2011 in the year to May 2023. It is also notable that first-time buyers are qualifying for mortgages even at higher interest rates.
The BPFI CEO stated that first-time buyers are normally the largest cohort in the market, and these figures suggest that they continue to drive the market forward.
Factors Driving Approval Numbers
The notable surge in home loan approvals for new buyers during May 2023 can be attributed to various factors, including the current state of the economy and the shortage of rental properties. However, other factors are also contributing to this trend. Here are three key factors that have helped to drive the record high first-time buyer mortgage approvals in Ireland:
- Favorable Interest Rates: Despite the rising interest rates, first-time buyers are still qualifying for mortgages. This indicates that lenders are offering attractive rates to attract new buyers. Moreover, the low-interest rates have made borrowing more affordable for first-time buyers, thereby driving up the demand for mortgages.
- Government Incentives: The government has introduced a range of incentives to encourage first-time buyers to enter the property market. These incentives include the Help to Buy scheme, which provides a tax rebate of up to 10% of the purchase price of a new home, and the Rebuilding Ireland Home Loan, which offers fixed-rate mortgages to first-time buyers with low-interest rates.
- Increased Confidence: The Irish economy has shown resilience in the face of the COVID-19 pandemic, and this has helped to boost consumer confidence. As a result, more people are willing to invest in property, thereby driving up the demand for mortgages.
Additionally, the shortage of rental properties has made buying a home a more attractive option for many individuals, further contributing to the surge in mortgage approvals.
Qualification for Mortgages
Qualifying for a mortgage in the current market requires meeting certain criteria and demonstrating financial stability. Lenders typically consider a borrower’s credit score, income, and employment history to assess the level of risk involved in granting the mortgage.
In Ireland, first-time buyers can access the Help to Buy scheme, which provides a tax rebate of up to €30,000 for the purchase of new builds. This has helped to make home ownership more accessible for those who may not have been able to afford it otherwise.
Despite rising interest rates, first-time buyers in Ireland are still able to qualify for mortgages. This is due in part to the country’s resilient economy and the shortage of rental properties, which is driving more people to buy. Additionally, lenders are willing to approve mortgages at higher interest rates, indicating a level of confidence in the market.
Overall, the record high number of first-time buyer mortgage approvals in May 2023 is a positive sign for the Irish property market and suggests that home ownership remains a viable option for many.
Impact of Rising Interest Rates
Despite the recent increase in interest rates, the Irish property market continues to attract new homebuyers, demonstrating the resilience of the industry in the face of economic challenges. The rise in interest rates is a result of the Central Bank of Ireland’s decision to increase the base rate from 1.5% to 2%, in an attempt to curb inflation and maintain financial stability.
Despite this, first-time buyer mortgage approvals in Ireland have reached record highs, indicating that buyers are still keen to get on the property ladder.
To understand the impact of rising interest rates on the Irish property market, it is important to consider the following factors:
- The affordability of mortgages: Although interest rates have risen, mortgage rates are still relatively low compared to previous years. This means that first-time buyers can still access affordable mortgages, enabling them to purchase their own homes.
- The supply and demand for housing: There is a shortage of rental properties in Ireland, which is driving more people to buy their own homes. This increase in demand is helping to sustain the property market, despite rising interest rates.
- The strength of the Irish economy: The Irish economy is currently performing well, with GDP growth forecast to be around 4.5% in 2023. This strength is providing a stable foundation for the property market, which is helping to offset the impact of rising interest rates.
- The availability of alternative financing options: There are a range of alternative financing options available to first-time buyers, including government schemes and shared ownership arrangements. These options are helping to support the property market and make it more accessible for those who may not be able to afford traditional mortgages.
Future Outlook for First-Time Buyers
Looking forward, the future outlook for first-time buyers in Ireland appears positive. The robust economy and the shortage of rental properties are driving more people to buy, and with mortgage approvals at their highest level in over a decade, it is likely that first-time buyers will continue to be a significant cohort in the Irish property market.
Furthermore, the accessibility of affordable financing options, even at higher interest rates, is another factor that will continue to support the demand for first-time buyer mortgages.
As the property market continues to evolve, it will be interesting to see how the government and financial institutions respond to the growing demand for affordable housing and financing options for first-time buyers.
Overall, the outlook for first-time buyers in the Irish property market is promising, with ample opportunities for potential homeowners to enter the market and secure their first home.
