Second-time buyers getting crucified by the State again

After paying huge stamp duty and the highest interest rates in Europe, now they are being hit by first-time buyers, writes Brendan Burgess

OKAY, so you bought a starter home 10 years ago. Although you were working in the city centre, you couldn’t afford to buy a house anywhere near where you worked or near where you were brought up. You considered buying a three-bed semi-d in Edenderry or a onebed apartment in Dublin 15. In the end, you opted for the apartment, planning to trade up after a few years.

The price you paid probably included €40,000 VAT and another €10,000 in stamp duty. Now, 10 years later, your house is worth a lot less than you paid for it. Since then, you have taken pay cuts and you have faced increases in income tax and USC. As a responsible citizen, you paid your water charges and you have also paid your property tax.

As you were not lucky enough to get a tracker mortgage, you are one of the 300,000 Irish borrowers who are paying the highest mortgage rates in Europe.

As you are a customer of the State-owned Permanent TSB, you are paying 4.3pc and there is nothing you can do about it. You can’t switch as you don’t have enough equity. You are paying €400 more in interest a month than you would be paying in any other European country.

You have probably contributed a total of around €30,000 in excessive interest to the coffers of Permanent TSB. You could have paid this money off your mortgage or you could have saved it towards the deposit for the house you desperately need to trade up to.

So instead of relying on the State to provide you with your housing needs, you provided them for yourself. You were worried about your very high mortgage and the level of negative equity, so you cut back your day-to-day expenditure and overpaid your mortgage. Although the value of the apartment is a lot less now, you have paid off enough capital so that you are just out of negative equity.

You want to have kids, but you can’t in a small apartment. The Central Bank says you need a deposit of 20pc of the price of a new house. But you have spent all your money overpaying your mortgage to get rid of the negative equity.

To buy a semi-d in Dublin for €400,000 you’ ll need 20pc, or €80,000. Up until just a few days ago, a first-time buyer was required to have a deposit of €58,000. With last week’s relaxation of the Central Bank rules, the first-time buyer will need only 10pc, or €40,000.

And to add insult to injury, the Government’s Help to Buy Scheme will give them half of that. So a second-time buyer needs €80,000 to compete with a first-time buyer who needs only €20,000 for the exact same house.

You were hoping that a first-time buyer might buy your apartment which would enable you to trade up, but now you are worried that first-time buyers might ignore second-hand houses as they are getting the grant for newly built properties only.

Of course, you are not only competing with first-time buyers. The Government is also competing with you by buying houses to provide social housing for people who can’t or won’t work. It’s one thing for the Government to use your housing taxes to build new social houses, it’s another thing completely for it to compete with you by buying privately owned and build houses for people who can’t or won’t work.

All you want is fair play — a level playing field. It wouldn’t be too hard to fix. As a second-time buyer, you should be allowed to borrow up to your existing LTV, subject to a maximum of 90pc. So if your existing LTV is 85pc, that would be your maximum. If your existing LTV is 95pc, you would be limited to 90pc.

The Government should scrap the grant for first-time buyers and, instead, reduce VAT on new houses by 50pc for all buyers of new houses. And the State-owned banks should stop charging Irish citizens the highest mortgage rates in Europe.

There is a serious housing shortage and the Government is to be commended for encouraging the building of new houses. But it should not be subsidising one group at the expense of another group, which has already paid heavily for relying on themselves rather than relying on the State.

‘Stop charging Irish citizens the highest mortgage rates in Europe’