A major think-tank has said that the mortgage lending limits introduced by the Central Bank will reduce the amount of development by 5% over the next 4 years. These findings are worrying considering the growing shortage of homes on the market which has already pushed rents above the levels seen during the Celtic tiger.
The restrictions on the amount that can be borrowed which were introduced in January 2015 are having a knock-on effect on the supply of property. The ESRI confirm that their latest research says there has been a dip in the number of mortgages being taken out as a result of the lending limits and deposit requirements and this will discourage development because they limit the profits that builders can make.
Currently first-time buyers can borrow 90% of a property’s value up to €220,000 and for amounts over this they will need a deposit of 20%.
With loan to income restrictions, mortgages for homes are subject to a limit of 3.5 times the loan value to the gross income of the borrower.
Taking an average home value in Dublin of say €400,000 this would mean that the borrower/’s must have a deposit saved of €58,000 and they must have a gross salary of c. €98,000.
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