Some 80pc of potential first-time home buyers are stuck in a rental trap and can’t get the mortgage they need to get on the property ladder, according to new research from Genworth Financial.
The research, conducted by Ignite Research, also found that first time buyers are placing a continuing reliance on their parents to help fund new home purchases.
It found that 71pc of respondents believe first time buyers are turning to their parents for financial help when purchasing a new home.
More than two thirds (70pc) of Irish consumers believe that the Government should do more to help first time buyers get onto the property ladder with four out of five believing that it is difficult for first time buyers to access mortgage funding for a property. A greater number (80pc of respondents) also want new measures to be introduced to avoid a return to the bad lending practices seen during the boom years.
With property prices continuing to rise in many areas, 61pc of would be first time buyers are worried about being able to afford to buy a home and 65pc of first time buyers see saving for a deposit as the main barrier to home ownership while 50pc of those living with their parents, expect to be still living with them in three years’ time.
Some 61pc of those who currently do not have a mortgage said it would be at least three years before they plan on taking out their first mortgage.
Commenting on the results of the survey, Jim Power, Economist, said they support the findings of research that he carried out earlier this year on the role of universal mortgage insurance in Ireland. Power’s study found that Universal Mortgage Insurance has the potential to facilitate first time buyers gaining access to mortgage finance and can do so in a way that is sustainable and responsible.
“This research confirms that people in the first time buyer segment of the market cannot access funding for new homes and are stuck either in the rental trap or continuing to place an excessive reliance on their parents for accommodation and financial support. This has significant social and economic consequences,” said Mr. Power.
In Construction 2020 the Government committed to reviewing the possible role of mortgage insurance in Ireland as an aid to regenerating the construction sector. Mortgage insurance is an insurance product banks and building societies take out to protect themselves for any losses suffered as a result of a borrower defaulting on their mortgage and being unable to repay the outstanding debt with the proceeds of the sale of the property.
With the additional oversight that mortgage insurance brings, lenders with mortgage insurance have a greater ability to lend to first time buyers with a smaller deposit but good credit rating and who have the ambition to own their own home. This helps first time buyers get a sustainable foothold on the property ladder sooner than they may have otherwise been able to.
Angel Mas, President and CEO, Mortgage Insurance Europe, Genworth believes a new approach is required to avoid a return to untenable lending practices.
“These findings demonstrate the fears and anxieties among Ireland’s first time buyers and consumers in general towards the current property market. People don’t want to see a return to the unsustainable mortgage lending practices of the boom time and new approaches are required which can make finance available, but without creating systemic risk. The advantage of introducing a universal mortgage insurance scheme targeted at first time buyers would facilitate banks to safely lend to those with a smaller deposit on a more prudential and sustainable basis.”