The Central Bank regulations introduced from 9th February 2015 are sure to affect anyone planning to buy a new home.
So what are these new regulations ?
The new rules introduce mortgage limits based on the value of the property you intend to purchase and your income level.
If you are a first time buyer you can borrow 90% of the property value up to €220,000. If the property costs more than €220,000, a limit of 80% will apply to borrowings on the portion over €220,000.
Your income level will effect your borrowing potential as your mortgage is limited to 3.5 times salary.
If however you are a buy-to-let investor, you will only be able to borrow up to 70% of the property value.
So what is the likely impact of these new rules ?
We feel that these new regulations have the potential to create all sorts of complicated buying scenarios. Firstly,parents may be put under pressure to help out their offspring in coming up with the 20%. This may involve using funds they saved for retirement, borrowing to meet the shortfall, gifting money or selling off assets. It may influence offspring to move back home, to avoid paying rent while they struggle to save the 20% and those who have not yet moved out of home, may be there longer than expected.
There is also the potential that some people, who feel they have no other option, may enter into a partnership– be it with siblings or friends in order to have sufficient savings and income levels to obtain a mortgage. While this seems like a viable option, things could go terrible wrong if a partnership agreement is not drawn up or one half decides to pull out at some stage.
Evidence to date shows that property prices have cooled as a result of the new rules,but also that the rental market has become even more crowded with rents spiraling.