According to a recent survey by the Sunday Business Post in Ireland, first-time buyers in the country are being offered mortgage loans up to seven times income. The report exceeds even previous exaggerated income multiples of five times, and begs the question, do first-time buyers really know what they are taking on?
The loans offered by Ulster Bank and others could cost borrowers who opt for them over 50 per cent of their monthly take-home pay. Professional couples could borrow up to seven times earnings over a 40-year home loan period.
Interest rate increases have driven mortgage borrowers to take out enormous home loans . Michael Dowling, the president of the Independent Mortgage Advisers’ Federation, a mortgage broker, reportedly said: "A number of lenders will give you credit for rental income, even if you don’t go on to rent out the room later on."
Further rate rises, likely both in the UK and Europe (European Central Bank), could leave borrowers of this type paying far more interest than before. Dowling confirmed: "Every quarter per cent rate rise - the amount by which the rate increases each time - reduces the amount that someone can borrow by €25,000."
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