Affordability for first time buyers in Kerry stands at
just over half the national average

Mortgage affordability for first-time buyers is improving, according to the latest EBS DKM Affordability Index. This is due to a combination of lower loan to value (LTV) ratio for first-time buyers, a 2% increase in average earnings in 2015 and a reduction in average mortgage interest rates to 3.7% in January 2016 compared with 4.3 per cent one year earlier.

Affordability is defined as the proportion of after-tax income required to meet mortgage payments in the first year for an average first-time buyer working couple each on average earnings.

In Kerry, the average house price stands at €118,000 up 6.3% on 2014. The average first time buyer working couple requires 10.8% of their after tax income to meet their mortgage repayments, which compares to a national figure of 19.1%.

The average first-time buyer property price nationally was estimated at €222,782 in January 2016 implying an average mortgage of €178,255 based on an 80% LTV. Paying this off cost 19.1% of average net income in January 2016 – down from 19.5% a year earlier.

Dublin homes also became more affordable, but are still much less affordable than almost everywhere else in the country. Repaying a mortgage in the capital accounted for 21.3% of the net income of an average working couple in January 2016, down from the most recent peak of 24.3% just over one year earlier.

The large affordability gap between the Dublin area and most of the country has been exacerbated by a lack of supply over the past number of years. For example, just over 8,000 new housing units commenced nationwide last year, of which only 3,100 were in Dublin.

Affordability for single buyers improved slightly in 2015 but remains very challenging with repayments accounting for 38.1% of net income.

The findings show that the new lending rules introduced by the Central Bank of Ireland in February 2015 have made it more difficult for first-time buyers to raise a mortgage due to restrictions on LTV and loan to income Loan to Income (LTI) ratios. But the rules have also resulted in first-time buyers borrowing less, thus improving affordability.