Only 4/10 Under 35's can afford a mortgage

Villa05

At present, some four out of 10 of those who are renting could afford to buy, based on current mortgage lending rates.

http://www.independent.ie/business/personal-finance/property-mortgages/shortage-of-city-houses-to-spark-price-surge-3143917.html
Despite record low interest rates and world record property price falls, only 4/10 under 35's can afford a mortgage, how many of these U35's are going to remain in the country when the axe will fall on education and health budgets and their tax charges balloon to pay for our beloved banks.

In Charlie Westons's other vested interest property propaganda

"Mortgage costs coming down is set to have a massive impact on spending power," IBEC's Fergal O'Brien said.

http://www.independent.ie/business/personal-finance/property-mortgages/mortgage-holders-to-be-1000-better-off-in-rates-drop-3143943.html
Given that mortgage costs are at record lows, how much downside is there and more importantly upside.

edellc

.

Balmed Out

Price surge me arse

How do they work out the 4/10 I wonder. I know lots who could but Id imagine there wouldnt be many younger then mid 20s

seamus

Thread title is a bit misleading on two counts;

1. What's the statistical norm for renters who can afford a mortgage? Perhaps 4/10 is a surprisingly large figure. "Only" may not be the correct word.

2. The article does specifically state that 4/10 renters can afford a mortgage. A large proportion of under-35's (or at least those between 30 and 35) will already have a mortgage.

On the flipside, I'm not sure if the analysis in the article is all that correct either. Just because someone can afford a mortgage, doesn't mean they'll buy. People have been in an extended period of renting over the last five years, which they may not otherwise have been. So we don't know how many of the "could afford a mortgage" people have gotten to like the benefits of renting over buying.

brownej

seamus wrote: »

Thread title is a bit misleading on two counts;

2. The article does specifically state that 4/10 renters can afford a mortgage. A large proportion of under-35's (or at least those between 30 and 35) will already have a mortgage.

How many of them can actually afford that mortgage?

seamus

brownej wrote: »

How many of them can actually afford that mortgage?

At least 86% would be my guess, given estimates that 14% of mortgages are in arrears.

That's only a guess of course, since I doubt demographic data is available for the arrears figures.

brownej

The full ESRI atricle that is being referenced can be found here
The specific reference to 40 per cent of renters can afford to buy is on page 13.

ted1

At the moment a mortgage is cheaper than renting, SO i fail to see how they reckon only 4 in ten can afford it.

TheDriver

but thats only per month, you need to take into account the stress test, savings etc

Remember thats what got us into this mess in the 1st place, people who could afford the mortgage THIS MONTH with no tolerance for future stresses.

Ray Palmer

seamus wrote: »

brownej wrote: »

How many of them can actually afford that mortgage?

At least 86% would be my guess, given estimates that 14% of mortgages are in arrears.

That's only a guess of course, since I doubt demographic data is available for the arrears figures.

It kind of bugs me how people assume that everybody is in the same boat. Not everybody who got big mortgage was young. Lots of older people cashed in on their houses bought extra property, cars, gave it to their kids etc...
Some of these people suffer too. Lots of companies failed which tend to be owned by people over 35.
I wouldn't buy now with so much uncertainty and I would guess the same applies to most.
There are certainly people who are hoping to default as a plan. Staying in arears is part of that but how many is hard to tell.

Kosseegan

Some might be able to afford mortgage repayments, but how many have a substantial cash deposit available?
How many are in stable enough employment to ensure they can continue to pay.
Where are they going to get a loan? Just because a person can afford it, does not mean the banks will advance finance.
The case for buying is now weaker than it has been for years. The mortgage interest relief situation is different. AT one time interest relief was at the marginal rate, which meant almost half the mortage was paid by the taxman in the early years. The net repayment was a lot lower than the rent would have been. Until rents begin to exceed the likely mortgage payment on a house the case will not be compelling.

dazberry

Kosseegan wrote: »

Some might be able to afford mortgage repayments, but how many have a substantial cash deposit available?
How many are in stable enough employment to ensure they can continue to pay.
Where are they going to get a loan? Just because a person can afford it, does not mean the banks will advance finance.

If you read the report (see brownej's post) you'll see that there are a lot of IFs in the report (like most economic forecasts I'd imagine), and IF this and IF that and IF t'other THEN...

Assuming a 25 year mortgage, a 90 per cent loan-to-value ratio and based on the current average interest rate for mortgages, approximately 4.25 per cent, we can estimate a house price level consistent with current rental payments. This suggests that current house price levels would only allow approximately 40 per cent of those renting to buy, and this is on the assumption that they have saved the required deposit.

... and by the time it gets to the newspapers it's reported as fact. Lies, damn lies, and statistics...

D.

Zamboni

New just in, Charlie Weston isolates affordability and predicts property price surge.

He is consistent. I'll give him that.

strandroad

dazberry wrote: »

If you read the report (see brownej's post) you'll see that there are a lot of IFs in the report (like most economic forecasts I'd imagine), and IF this and IF that and IF t'other THEN...

Assuming a 25 year mortgage, a 90 per cent loan-to-value ratio and based on the current average interest rate for mortgages, approximately 4.25 per cent, we can estimate a house price level consistent with current rental payments. This suggests that current house price levels would only allow approximately 40 per cent of those renting to buy, and this is on the assumption that they have saved the required deposit.

... and by the time it gets to the newspapers it's reported as fact. Lies, damn lies, and statistics...

D.

Also assuming that they are eligible for the mortgage, i.e. in stable jobs, history of employment and savings, no bad credit etc etc. Once you take this, and the deposit, into account, the 4/10 figure falls apart.

Oh and the fact that a large number of renters (40-150%, as it was reported?) are on rent supplement, i.e. not able to get any mortgage even though the supplement covers their rent.

antoobrien

dazberry wrote: »

If you read the report (see brownej's post) you'll see that there are a lot of IFs in the report (like most economic forecasts I'd imagine), and IF this and IF that and IF t'other THEN...

Assuming a 25 year mortgage, a 90 per cent loan-to-value ratio and based on the current average interest rate for mortgages, approximately 4.25 per cent, we can estimate a house price level consistent with current rental payments. This suggests that current house price levels would only allow approximately 40 per cent of those renting to buy, and this is on the assumption that they have saved the required deposit.

D.

That all means that, assuming I can find a property in a location I could actually live and work, I can afford a mortgage of €125,000.

<door slamming, screeching tyres on the way to the bank>:rolleyes:

jimmycrackcorm

Are the stats based on single people or couples?

I find it bizarre that during the boom years so many single people bought individual properties (with an assumption that job security was permanent) as opposed to a couple buying together where the risk may be mitigated by having dual incomes.

antoobrien

jimmycrackcorm wrote: »

Are the stats based on single people or couples?

I find it bizarre that during the boom years so many single people bought individual properties (with an assumption that job security was permanent) as opposed to a couple buying together where the risk may be mitigated by having dual incomes.

I don't know that many young people that could afford a property on their own before about 2 years ago. Almost everybody I know had bought with somebody, either a family member or as a couple, which has lead to some interesting conversations when the couples split up.

Cool Rider

ted1 wrote: »

At the moment a mortgage is cheaper than renting, SO i fail to see how they reckon only 4 in ten can afford it.

This is marketing mantra for banks-EAs its not true, and I will not fall for it. Mortgage is cheaper than renting if you tie yourself down for next 35 years, its a lifetime. I guess like me all on sidelines are waiting for it to come down to 20-25 years.

monkeybutter

I'm under 35 I can afford a mortgage, for a 1 bedroom apt in Leitrim, do I count?

Zamboni

antoobrien wrote: »

I don't know that many young people that could afford a property on their own before about 2 years ago. Almost everybody I know had bought with somebody, either a family member or as a couple, which has lead to some interesting conversations when the couples split up.

http://www.boards.ie/vbulletin/showthread.php?t=2056675751

antoobrien

Cool Rider wrote: »

This is marketing mantra for banks-EAs its not true, and I will not fall for it. Mortgage is cheaper than renting if you tie yourself down for next 35 years, its a lifetime. I guess like me all on sidelines are waiting for it to come down to 20-25 years.

Right now the rent on my apartment is €950/m. Mortgage repayments are (currently) €916.26/m on €185k for 25 years.

That would leave me able to afford several properties in D5 (where I'm living) without increasing my other costs.

Granted I'd want a fair bit more leeway than that make it worth my while to buy, but that's a personal choice.

Kosseegan

antoobrien wrote: »

Right now the rent on my apartment is €950/m. Mortgage repayments are (currently) €916.26/m on €185k for 25 years.

That would leave me able to afford several properties in D5 (where I'm living) without increasing my other costs.

Granted I'd want a fair bit more leeway than that make it worth my while to buy, but that's a personal choice.

Add the service charge to the mortgage and factor in other maintenance costs. It is far cheaper to rent.

ted1

Kosseegan wrote: »

Add the service charge to the mortgage and factor in other maintenance costs. It is far cheaper to rent.

rent was €1150, mortgage after relief is €750, insurance is €60 a month. €810 a month. =saving off €340 (obvioulsy there is maintenance costs, but i can do most myself so will be better off) i had bin charges already..

it's the same house I was renting but about 200 meters away in a slightly better estate.

i'll also own the property at then end of the mortgage, meaning i can retire without having to worry where i'll live

Ray Palmer

Kosseegan wrote: »

Add the service charge to the mortgage and factor in other maintenance costs. It is far cheaper to rent.

rent a room and it would be far cheaper to buy. Unless he was only talking about a one bed.
There are two bed apartments on the howth road in that bracket. Close to DART buses and all other services.

EricPraline

dazberry wrote: »

If you read the report (see brownej's post) you'll see that there are a lot of IFs in the report (like most economic forecasts I'd imagine), and IF this and IF that and IF t'other THEN...



... and by the time it gets to the newspapers it's reported as fact. Lies, damn lies, and statistics...

I don't see the problem with the report providing these caveats. The real fault lies with poor reporting (constantly in evidence in relation to anything property-related). The caveats and subtleties are lost. Instead the reporter paints a black-and-white picture aimed at the lowest common denominator.

Villa05

seamus wrote: »

At least 86% would be my guess, given estimates that 14% of mortgages are in arrears.

That's only a guess of course, since I doubt demographic data is available for the arrears figures.

Guess again, If you are under 35, you would have bought in the last 10 years, therefore in the highest bracket of negative equity plus this demographic would have been the worst affected by the job losses over the last 4 years

gurramok

Ray Palmer wrote: »

rent a room and it would be far cheaper to buy.

Why rent a room? The idea of buying 'your own place' is out the window as its not really your place in that you have to invite a stranger in to help you with the mortgage. Only the house is in your name, say goodbye to privacy, like renting again!

Ray Palmer

gurramok wrote: »

Ray Palmer wrote: »

rent a room and it would be far cheaper to buy.

Why rent a room? The idea of buying 'your own place' is out the window as its not really your place in that you have to invite a stranger in to help you with the mortgage. Only the house is in your name, say goodbye to privacy, like renting again!

It would be cheaper than renting and you get to decide who you live with. Rents will go up over 25 years.
A different risk than renting but either is a risk.

gurramok

Ray Palmer wrote: »

It would be cheaper than renting and you get to decide who you live with. Rents will go up over 25 years.
A different risk than renting but either is a risk.

Disregarding your 25yr comment as no-one knows what will happen then...So you know someone(a friend) to live with, how exactly is it your own place then?

And how long should you have that friend\stranger living with you to afford the mortgage?

StillWaters

gurramok wrote: »

Disregarding your 25yr comment as no-one knows what will happen then...So you know someone(a friend) to live with, how exactly is it your own place then?

And how long should you have that friend\stranger living with you to afford the mortgage?

I think Ray meant rent will rise each year in line with inflation (or thereabouts) whereas your mortgage repayment stays the same or thereabouts.

It's your own place as you own it of course!

Mortgage stress testing is now such that if you qualify, you should not NEED to rent a room, and certainly the income is not included for mortgage calculations the way it used to be.
Some people will CHOOSE to rent a room for the extra cash. Certainly in the early years when savings are depleted, and setting up home costs are high.

seamus

Villa05 wrote: »

Guess again, If you are under 35, you would have bought in the last 10 years, therefore in the highest bracket of negative equity plus this demographic would have been the worst affected by the job losses over the last 4 years

There's no correlation between arrears and negative equity.

Being in negative equity doesn't make your mortgage more expensive. If anything, a large proportion of those who bought in the last ten years are on tracker mortgages and are therefore enjoying the most affordable mortgage rates out of anyone.

Have you any citations for your claim that under 35 homeowners were the most affected by job losses? How do you know it wasn't the over-40 homeowners? Or under-30 renters?

You can't make claims about demographics without data.

Mr. Loverman

ted1 wrote: »

rent was €1150, mortgage after relief is €750, insurance is €60 a month. €810 a month. =saving off €340 (obvioulsy there is maintenance costs, but i can do most myself so will be better off) i had bin charges already..

it's the same house I was renting but about 200 meters away in a slightly better estate.

i'll also own the property at then end of the mortgage, meaning i can retire without having to worry where i'll live

What about all the costs associated with buying the property?

What about when interest rates increase?

What about negative equity?

What about the intangible items such as lack of mobility due to owning?

There are pros and cons to buying now. More cons than pros, IMO.

ted1

Mr. Loverman wrote: »

What about all the costs associated with buying the property?

What about when interest rates increase?

What about negative equity?

What about the intangible items such as lack of mobility due to owning?

There are pros and cons to buying now. More cons than pros, IMO.

Didn't have many costs for buying, there's a solicitor in the family, for mobility I can always rent it out. There is no negative equity, I bought at a third of 2008 price.

I have no rent to pay when i'm older.

StillWaters

Mr. Loverman wrote: »

What about all the costs associated with buying the property?

What about when interest rates increase?

What about negative equity?

What about the intangible items such as lack of mobility due to owning?

There are pros and cons to buying now. More cons than pros, IMO.

• Costs of buying are now cheaper than they have been for years, Stamp Duty is 1%, and legal and engineer prices are competitive
• When interest rates rise, rents will rise, there is a direct correlation.
• Regarding NE, most people buying now are putting down hefty deposits, so are protected somewhat from NE.
• Certainly home ownership is not for everyone, if you foresee a need for mobility, it would be silly to buy.

Mr. Loverman

StillWaters wrote: »

• Costs of buying are now cheaper than they have been for years, Stamp Duty is 1%, and legal and engineer prices are competitive
• When interest rates rise, rents will rise, there is a direct correlation.
• Regarding NE, most people buying now are putting down hefty deposits, so are protected somewhat from NE.
• Certainly home ownership is not for everyone, if you foresee a need for mobility, it would be silly to buy.

You still have to pay stamp duty and the legal and engineer fees, and in my experience rent prices do not track interest changes.

The type of properties I am interested in generally are quite expensive, so I can rent a very nice property in a very nice location for significantly less than the cost of the mortgage. I am able to save the difference between the rent price and the mortgage price.

I do intend to buy (for cash) when the **** storm has somewhat passed in the next 10 years. Until then I will live in a beautiful property and save cash.

Kosseegan

StillWaters wrote: »

• When interest rates rise, rents will rise, there is a direct correlation.
  

Interest rate rises tend to coincide with rents falling. Rising interest rates often mean less employment since business have higher costs. Alos some people start to rent out rooms in their houses or rent out holiday homes in times of higher interest rates.

Victor

In the short term, prices are likely to fall as you won't be able to get TRS any more.

Villa05

seamus wrote: »

There's no correlation between arrears and negative equity.

Being in negative equity doesn't make your mortgage more expensive. If anything, a large proportion of those who bought in the last ten years are on tracker mortgages and are therefore enjoying the most affordable mortgage rates out of anyone.

Have you any citations for your claim that under 35 homeowners were the most affected by job losses? How do you know it wasn't the over-40 homeowners? Or under-30 renters?

You can't make claims about demographics without data.

KBC Report Google Doc's link for your convenience http://bit.ly/NQ3QY0

The drop in employment has also been heavily concentrated in the under 35’s. Between the third quarters of 2010 and 2011, numbers at work in Ireland fell by 2.5%. Over the same period the number of under 35’s in jobs declined by 7.6% whereas the number of over 35’s in work actually increased, albeit marginally, by 0.8%. This reinforces the strongly divergent trend evident since the downturn began. While overall employment fell by 16% since late 2007, this has been almost entirely due to a 31.6% fall in employment among under 35’s. Over this period numbers at work aged over 35 fell by just 3%. Clearly, the very skewed age profile of jobs losses reinforces the weakness in activity in consumer spending and housing within the Irish economy as the under 35’s are the key spending age group. These trends also dovetail with the pick-up in outward migration

What % of these were renters or Homeowners I don't know, but I do know that if you had a pulse and showed signs of life you qualified for a mortgage during the bubble.

I know of 2 single parents on state support only who got a (non subprime) mortgage in 2004

Villa05

seamus wrote: »

Being in negative equity doesn't make your mortgage more expensive. If anything, a large proportion of those who bought in the last ten years are on tracker mortgages and are therefore enjoying the most affordable mortgage rates out of anyone.
.

They may have a better time of it on trackers, but if they have lost their job, they cannot afford the mortgage

Those still employed may be on reduced pay plus being on a tracker means they are trapped and out of the game as far as buying a bigger house is concerned. If they sell and re buy the tracker is gone

With so many loss making trackers, the banks have little to lend and will up interest rates to new customers to subsidise trackers. This will further dampen demand

Ray Palmer

Villa05 wrote: »

They may have a better time of it on trackers, but if they have lost their job, they cannot afford the mortgage

Those still employed may be on reduced pay plus being on a tracker means they are trapped and out of the game as far as buying a bigger house is concerned. If they sell and re buy the tracker is gone

With so many loss making trackers, the banks have little to lend and will up interest rates to new customers to subsidise trackers. This will further dampen demand

NOT EVERYBODY! The whole population has lost their jobs and lost wages. Not even the vast majority. Why do people insist on assuming everybody bought at the peak and lost their jobs. There is a lot of fear which is the biggest problem.

Nothing new but it is pretty irritating how people just go with the herd. No different from those who claimed the prices would go up forever.

Lots of unknowns going on and lots of really new situations. The euro really is a game changer.

Villa05

@ray palmer
Did u read my posts before replying

Mr. Loverman

Ray Palmer wrote: »

it is pretty irritating how people just go with the herd. No different from those who claimed the prices would go up forever.

I really disagree with this.

The herd during the bubble were making decisions based on faulty data (e.g. lying estate agents, politicians, bankers, their accountant sister in law, etc.) whereas the people now who say the economy is ****ed etc. are making decisions based on reality.

IMO the safest option at the moment is to continue renting, move your savings to Germany, and see what happens. There is a realistic chance the euro may not exist in its current form in 12 months which potentially means another **** storm for Ireland. And obviously our economy continues to tank which probably means a continuing decline in house prices.

There is no urgency to buy now. Keep your emotions in check and use your head.

Cool Rider

I am pretty obvious that property punters forgot to take into a/c one small anomaly, i.e. what will happen if euro fails which is getting highly likely with each passing day.
"IMF warns euro's survival is at stake unless action taken"
http://www.irishtimes.com/newspaper/breaking/2012/0622/breaking4.html
PS: I see house prices stabilising in last month or so which is just gonna be a short term factor, in long term faltering Euro economies will bring down house of cards with them. So going against my emotions decided top halt the home purchase till I will get 30% discount next year:)

Theboinkmaster

ted1 wrote: »

rent was €1150, mortgage after relief is €750, insurance is €60 a month. €810 a month. =saving off €340 (obvioulsy there is maintenance costs, but i can do most myself so will be better off) i had bin charges already..

it's the same house I was renting but about 200 meters away in a slightly better estate.

i'll also own the property at then end of the mortgage, meaning i can retire without having to worry where i'll live

I'm sorry but this is 4 year old arithmetic, you've left off loads of costs including the most important one depreciation.

You buy now for €300k. In 2 years time same property is €250k. You've just spent €50k plus interest over life of mortgage so maybe €70-80k. That is a real cash expense.

Theboinkmaster

Mr. Loverman wrote: »

I really disagree with this.

The herd during the bubble were making decisions based on faulty data (e.g. lying estate agents, politicians, bankers, their accountant sister in law, etc.) whereas the people now who say the economy is ****ed etc. are making decisions based on reality.

IMO the safest option at the moment is to continue renting, move your savings to Germany, and see what happens. There is a realistic chance the euro may not exist in its current form in 12 months which potentially means another **** storm for Ireland. And obviously our economy continues to tank which probably means a continuing decline in house prices.

There is no urgency to buy now. Keep your emotions in check and use your head.

100% agree - anyone buying now is mental.

ted1

Theboinkmaster wrote: »

I'm sorry but this is 4 year old arithmetic, you've left off loads of costs including the most important one depreciation.

You buy now for €300k. In 2 years time same property is €250k. You've just spent €50k plus interest over life of mortgage so maybe €70-80k. That is a real cash expense.

it's a three bed semi D in a very nice part of SoCodu I can tell you it's not going to go much lower.

my rent was 14,000 per year which is about 7% of my mortgage. if the price drops by 21% over 3 years i'm still in a better situation. i will own the property at the end of the mortgage.