Salary levels needed to get mortgage plunge 50%

The minimum salary needed to secure a mortgage from a bank has plunged by as much as 50% over the last two years, according to a new report.

In north Dublin the salary needed by a single buyer for a three-bed semi based on a 90% mortgage has dropped from €83,000 in 2007 to €41,000 today.

Figures compiled by wealth advisor Financial Engineering show repayments, when factoring in mortgage interest relief, are €now €947 a month, whereas the cost of renting the same property is €1,300. In 2007 monthly repayments on this house would have been just under €2,000.

In Blackrock, Co Dublin, the salary required for the same property has fallen from €168,000 in 2007 to €85,000 while in Montenotte, Cork the salary needed has halved from €80,000 to €40,000.

Over the last few months the cost of a mortgage for first-time buyers has fallen an average of 35%, with many lenders offering one-year fixed-rate mortgages at 2.35% up to 92% loan-to-value.

Also interest rates have dropped sharply since September last year, with the European Central Bank dropping rates by 3% to 1.25%. A further rate drop is expected next month.

Associate director at Financial Engineering James Maguire said: "We are delighted to finally be able to unveil some good news for people in the midst of the shroud of doom and gloom that has recently covered our property market.

"The income requirements for mortgage applicants have reduced significantly, which means that now you don’t have to be earning a fortune to buy your dream home."

Record market conditions are creating the most favourable buying conditions in a generation, according to the director of the Irish Mortgage Corporation, Frank Conway.

He said, however, that although affordability has improved the latest findings fail to take into account the significant reductions to personal incomes in the private sector as well as the introduction of, and increase to, various government levies and tax bands.

He said this means first-time buyers are the big winners given that they can avail of up to €416 in mortgage interest relief in the first two years.

According to the index property prices in north Dublin are down by about €130,000 over the last two years and by about €277,000 in Blackrock, Co Dublin. Property prices in Cork city are down about €140,000 since 2007 and by about €110,000 in Oranmore, Galway.

Prices at the Parkview development at Stepaside, South Dublin, have dropped by up to €180,000 on apartments and by more than €200,000 on penthouses, according to Mr Maguire.
   
The Irish Examiner
By Niamh Hennessy
Tuesday, April 21, 2009