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FTB lending is growing in the UK and Ireland despite supply issues

22nd September 2017

The research, UK and Irish Housing Markets: A First-Time Buyer Perspective, draws on detailed loan data to provide the first detailed comparison of mortgage markets in the two countries.  Some of the key findings are that:

  • the age distribution of first-time buyers in the UK was broadly unchanged between 2004 and 2016, while in Ireland there has been a significant fall in young first-time buyer numbers;
  • first-time buyers in the UK have been borrowing over longer terms since the financial crisis, while in Ireland the trend has been to borrow for shorter periods;
  • borrowing with small deposits, of up to 5% of the purchase price, remains largely absent from both countries;
  • higher property prices mean that first-time buyers typically borrow a higher multiple of their income in the capital cities of London and Dublin; and
  • there is evidence of loans bunching just below macro-prudential borrowing limits in both countries – 90% loan-to-value and 3.5 times income in Ireland, and 4.5 times income in the UK – but lending above these limits has fallen in both countries.

The report says that first-time buyers are vital to the health of the housing market, providing liquidity and helping existing home-owners to move.  But they are affected by demographic, government and regulatory changes that could alter the profile of first-time buyers:

  • older people account for a growing share of the population, and experiences that prompt household formation, like marriage and childbirth, are occurring later in life;
  • housebuilding and sales activity are still recovering from the financial crisis, and a lack of liquidity in the market means that people are often unable or unwilling to move; and
  • government housing schemes have sought to address these problems in both countries, but they have been more explicitly targeted at first-time buyers in Ireland than in the UK.

In the executive summary, the report’s joint authors, Anthony O’Brien, of the BPFI, and Mohammad Jamei, of UK Finance, comment:

“Ireland and the UK have experienced similar large falls in the rate of home-ownership since the mid-2000s.   Government schemes aim to promote activity in the housing market, while regulation aims to keep the market sustainable.  Given that housing supply has been sluggish since 2009 and demand has remained high, there is potential for tension between regulation and government housing schemes.  This is likely to continue for the foreseeable future unless housing supply grows more quickly.”

The full report is available on our website here: Other Research Reports.

Notes to Editors

  1. UK Finance is a new trade association which was formed on 1 July 2017 to represent the finance and banking industry operating in the UK. It represents around 300 firms in the UK providing credit, banking, markets and payment-related services. The new organisation brings together activities previously carried out by the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association.UK Finance is a new trade association which was formed on 1 July 2017 to represent the finance and banking industry operating in the UK. It represents around 300 firms in the UK providing credit, banking, markets and payment-related services. The new organisation brings together activities previously carried out by the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association.
  2. Banking & Payments Federation Ireland (BPFI) is the voice of banking and payments in Ireland.  Representing over 70 domestic and international member institutions, we mobilise the sector’s collective resources and insights to deliver value and benefit to members, enabling them to build competitive sustainable businesses which support customers, the economy and society.
  3. The research report, UK and Irish Housing Markets: A First-Time Buyer Perspective, is published by UK Finance and Banking and Payments Federation Ireland (BPFI).  The joint authors are Anthony O’Brien, head of sector research and analysis at BPFI, and Mohammad Jamei, senior economist at UK Finance.

 

Contact: Keira Doyle, Head of Communications, 087 2694460

 

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