First-time home buyers are finding it more difficult to enter the real estate market than ever before, while individuals and families face limited options in the rental market.
The Housing and Infrastructure Agency’s monthly report, released on Friday, cites examples showing that first-time home buyers need to have significantly higher incomes to cover mortgage repayments due to higher interest rates, higher property prices and tighter credit conditions than a few years ago.
The income that first-time buyers need to cover the indexed loan payments on an average home is now over 70% higher than it was at the beginning of 2020. At the same time, the wage index has increased by 43%.
Due to the Central Bank’s rules from September 2021, repayments on first-time buyer loans cannot exceed 40% of their disposable income. “The necessary monthly income of first-time buyers to pay the installments of a 30-year indexed mortgage for an average apartment with a mortgage interest rate of 85% was therefore ISK 1.1 million in July 2024.
For comparison: The first buyers would only have had to have a monthly income of 630,000 ISK [í ársbyrjun 2020] to cover the repayments of a similar mortgage for an average home with the same debt burden,” the HMS report states.
The monthly payment burden on a 30-year indexed loan for an average apartment rose from ISK 177,000 in January 2020 to ISK 295,000 last July, or about 67%. The payment burden on a 30-year unsecured loan for an average apartment has risen from ISK 217,000 to ISK 564,000 during this period, or about 160%.
Read more in the Saturday edition of Morgunblaðin.
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