The Qualified Mortgage Patch

In less than a year, the Consumer Financial Protection Bureau (CFPB) is letting the “Qualified Mortgage Patch” (QM Patch) expire. Why does this matter for first time buyers?

The QM Patch states that mortgage buyers must have a debt-to income ratio less than or equal to 43% in order to buy a home. This rule was created to protect borrowers from racking up too much debt. Removing the QM patch could have drastic effects for the European economy. Let me explain:

I grew up living in the United States during the Mortgage Crisis of 2007. It started with many investors looking for low risk high reward profits. They turned to the housing market to buy those loans. Banks would convert thousands of marketable securities and turn them into shares for investors to buy. They believed the investments were safe because house prices were rising dramatically during this time and credit unions gave many of these securities AAA ratings. AAA rating is the best rating a house can receive.

Investors loved these loans because they were very profitable. They started pushing the …

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Parent’s continue to pay

Mortgages can be extremely overwhelming to any buyer, but especially those new to the market. Competition in the market is at extremely high levels, especially within the major Irish cities. This is due to rising house prices, little availability, and the intensity that comes with making an offer against other prepared competitors. In order to make an offer on any property, there are many hurdles that you must be able to jump through to even begin being an eligible purchaser. 

Loans have become much harder to get approval for as a first time buyer, especially if your credit history is not as detailed or robust as another person applying for the same type of loan. With high intensity competition beginning at stage one of getting a loan, many possible home buyers feel distressed from the get go. 

With Brexit on the horizon, banks have an iron hold on most of their funding; they are being extra selective about loan recipients in the hopes that they will have no issues in the repayment process.

Under the Central Bank rules, first time …

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May 2019 mortgage approvals offer high hopes

The mortgage scene is finally beginning to see some positive growth, especially for first time buyers. Recent figures have just been released for May 2019, which have shown substantial upward traction in regards to the approval of loans. 

The statistics indicated that there has been a 10pc increase in approvals when comparing May 2018 to May 2019. During May 2019, 4926 applications for loans were approved by at least one of the banks. Additionally, there was a 19.9pc increase from April to May of this year. 

Most of the approvals from May seem to have been heavily dominated by first time buyers, who made up 51pc. This demographic  is heavily marked to via social media and other online platforms. Additionally, banks advertise to this untapped market by offering exemptions that make getting a loan more affordable. 

This seems to have been effective, give that approvals are high for this month. If approvals are high, this indicated that there were also a very large number of first time buyer applications that the bank saw during the previous months. Mover purchases also …

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Effects of ending the help-to-buy scheme

The help-to-buy scheme was designed to help first time buyers buy a home. First time buyers are encouraged to buy property through the help-to-buy scheme by refunds of income tax and deposit interest retention tax paid over the last four years. The help-to-buy scheme allows purchasers to claim a rebate  tax already paid of income up to €20,000 depending on the value of the property.

There is a move to end the help-to-buy scheme. This would be detrimental to the housing market. Figures have shown that more than 80% of all first time buyers are relying on the scheme to buy a home.

However, the scheme is scheduled to end at the end of 2019. The government has given no indication of an extension of the help-to-buy scheme.

According to theBanking and Payments Federation, 84% of new property purchases were made by first time buyers with the support of the help to buy scheme. Furthermore, chief economist, Dr Ali Ugur, claimed that the help-to-buy scheme was important for market stability. It was a key component in helping housing supply increase and …

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Institutional Investors Hurting First-Time Buyers

Big time investors in the housing market are affecting first time buyers and their ability to purchase homes. Large scale investors are buying lots of hundreds of houses at a time and renovating them and re-selling them for profit. Home buyers are feeling the pressure and are unable to find homes in their price range. Fianna Fáil is calling on the current government to investigate the current tax incentives for investors and believes that could be a way to make significant changes.

The Department of Finance has agreed to do a review on how much institutional investors pay in taxes. However, Department of Finance has already begun releasing statements defending their current stance on taxes. They acknowledged that institutional investors only make up a small proportion of the housing market. A small proportion still can affect hundreds to thousands of people. According to Savills Estate Agents, approximately 3,000 properties were purchased in blocks by institutional investors last year. Many homebuyers searching for homes contribute large investment funds to increasing difficulty in getting a house.

Nicola McCann and her partner from …

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Renting vs. Buying

A current issue revolving around Irish news is whether to increase the supply of rental or property ownership. It is well known that there is a shortage in properties available, but just trying to produce as many properties as possible is not the solution. Careful review of the issue needs to take place by the government and necessary legislation would follow. Some factors to consider include; land zoning, shared ownership purchase models, tax breaks for EU nationals arriving for construction work, reduced CGT for empty sites, tax reduction for citizens downsizing, and help-to-buy schemes.

First time home buyers are having trouble purchasing homes due to the increasing purchase prices. It is universally agreed upon that more properties need to be available. According to an independent article, 2500 houses that were built in the first three months have not been sold yet. In addition, this is driving up decisions. That coupled with difficult mortgage banking is challenging middle- and lower-class citizens to find accommodation. These statements emphasize the lack of availability and ease for purchasing affordable housing.

Build-to-rent schemes have the …

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The Help to Buy Scheme

The Help to Buy (HTB) scheme is an incentive for first time property buyers. The scheme helps individuals with deposits needed to buy or build a house or apartment. The incentive is that the scheme will give individuals an income tax and deposit interest retention tax (DIRT) refund. This refund extends up to four years of income tax and DIRT tax paid in Ireland in arrears. The incentive has a limitation to a maximum of 5 percent of the purchase value of a home up to a value of €500,000.

To qualify for the scheme, individuals must be first time buyers. The property bought or going to built must be newly built with the construction subject to the value added tax (VAT) in Ireland. The requirements of the Help to Buy scheme also involves taking out a mortgage on the property with a qualifying lender. The loan to value ratio must be at least 70%. This loan to value ratio denotes the percent of the loan that covers the purchase value of the property.

The scheme is estimated to contribute about …

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Intriguing Statistics of First-Time Buyers

Perfect Property has recently found success in finding the common budget of the average house hunter in Dublin.

While in such a crisis, this is information that has been found is essentially vital in understanding a piece to the puzzle of what keeps buyers from buying.

Of course, there are statistics on the shortage of homes compared to the increasing demand, a factor into understanding the crisis that is just as vital.

According to Perfect Property, a relatively new search engine, the average Dublin house hunter has a budget of €315,000 to purchase a home with.

A pretty substantial budget for any home buyer, however, we are still observing a vast amount of first-time buyers applying for the new state mortgage scheme, introduced just a few months prior.

A scheme that was expected to cover nearly 1,000 loans and last for an extended period of time is now lucky if it lasts the full year.

Of course, when looking in the Dublin area it can be expected that the budget for a home will …

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Irish Housing Market Trends

Ireland has seen a hit take place in recent years as property market seems to be downsizing. Families, with two full-time working partners, are finding it difficult to afford houses at their current increasing costs.

It has even been reported by Mark Keenan, a writer for business property and mortgages that working families are struggling to rent as well.

The average working couple in Ireland is earning a combined income of 70,000 euros. This is far below what a couple needs to earn to afford a home today.

It is reported that the average home in Dublin is now priced at mid 400,000 levels. Much more than what the average working couple could afford.

In just the last three months, there has been a multiple week increase to sell a home in Dublin. The housing market is slowing down and it’s slowing down fast.

Why is it that homes are being put on the market for such high prices? It could be that those selling the homes are finding it hard to sell for less …

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Mortgage approvals up 45% in May

Data released by the Banking and Payments Federation Ireland revealed that mortgage approvals have gone up 35% May of this year in comparison to May of 2016.

 

There were a total of 4,124 mortgages approved in May, with a combined value of €884 million. This represents an increase of 1,078 mortgages and a €275 value compared to May of 2016.

 

This increase in mortgage approvals is likely caused by lower interest rates and by greater general confidence in the economy. It also represents a continuously growing demand in the housing market, and a supply that is slowly but surely catching up.

 

First time buyer mortgage approvals in particular are up 45.8%, the value of such mortgages also saw an even more dramatic increase of 60.7% compared to May of last year. This indicates growing confidence on the part of borrowers. First time buyers are purchasing more expensive housing and are seeing housing prices rise.

 

It is …

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