The desire among first time buyers to break free from the rental cycle and achieve homeownership remains unwavering, despite the current trajectory of rising interest rates and escalating housing costs. Recent statistics from the Banking and Payments Federation Ireland indicate that first time buyers accounted for 55% of all mortgage drawdowns in the first half of 2023, marking the highest level since 2011. This newfound optimism in achieving homeownership can be attributed to vital changes in the Central Bank's mortgage rules and the valuable support offered by the Government.

The Central Bank's revised mortgage rules, which came into effect in January 2023, allows first time buyers to borrow up to 4 times their annual income. This change in the rules has enhanced the feasibility of homeownership, particularly for individuals with lower income or single mortgage applicants.

Notwithstanding the easing of the lending limits, the minimum deposit requirement for first time buyers, set at 10% of the property's purchase price, remains unchanged. For many first time buyers, accumulating this deposit can be challenging. And, in addition to the 10% deposit, first time buyers will also have to save for expenses such as stamp duty, legal fees, valuation fees, and the cost of furnishing their new home. Fortunately, Government supports are available to bridge the financial gap between their mortgage and the property's purchase price.

The Help to Buy Scheme, extended until the end of 2024, offers assistance to first time buyers interested in buying or self-building a new residential property. This scheme aids in financing the required deposit by refunding the Income Tax and Deposit Retention Tax (DIRT) paid during the preceding four tax years. Eligible applicants can receive the lesser of €30,000, 10% of the new build property's value, 10% of the approved valuation of a self-build property, or the amount of income tax and DIRT paid over the four years preceding the HTB application.

The First Home Scheme is an equity scheme designed for first time buyers purchasing newly constructed homes, or self-building their home.

New-builds: Under the FHS, first time buyers are given the opportunity to receive up to 30% of the property's purchase price, effectively bridging the affordability gap between the deposit and mortgage, and the price of the home. When combined with the HTB Scheme, the FHS can fund up to 20% of the home's purchase price. In return for the funding, the Government will get an equity share in the home equal to the percentage of the funding they have provided.

Self-builds: From this week, the scope of the FHS has been extended to include self-builders who are building their first home anywhere in the Republic of Ireland. This means that individuals who have a site, or are purchasing a site, but do not have sufficient funds to build their home when they combine their deposit and mortgage, may be able to bridge the funding gap by availing of the self-build product offered by the FHS. Self-builders may qualify for funding up to 30% of the building costs of their home. If they are also availing of the Help to Buy Scheme, the maximum amount of funding they will be eligible for from the FHS will be 20% of the build cost.

In March 2023, the FHS was expanded to include the Tenant Home Purchase Scheme, affording tenants who have received a Notice of Termination the opportunity to purchase their rental property from their landlord. The THPS facilitates tenants in bridging the funding gap between their mortgage and deposit, enabling them to acquire their current rental home. In contrast to the FHS, the THPs permits the purchase of second-hand properties, and THPS applicants cannot avail of the Help to Buy Scheme.

The introduction of the THPS came at an opportune time, with reports from the Residential Tenancies Board revealing that more than 40,000 homes have exited the rental market over the past five years. Landlords are leaving the rental market for various reasons, thereby creating an opening for tenants facing lease termination to purchase their rental homes. With Tenant Home Purchase Scheme assistance, tenants with insufficient funds to buy their rental property by combining the mortgage they can receive and the deposit they have saved, can seek to bridge the funding gap.

In Ireland, mortgage repayments are cheaper than monthly rentals. And Government initiatives are creating opportunities for first time buyers to accelerate their way onto the property ladder. For more information on how these supports can help you achieve your homeownership aims, visit our website for useful guidance. Once you are ready to get started on your mortgage application, contact our team for personalised advice and support throughout your mortgage journey.