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UK Finance research compares first-time buyers in the UK and Ireland


Published: 22 September 2017

First-time buyers in both the UK and Ireland are suffering similar effects of the financial crisis, but in the last decade they have also undergone vastly different experiences because of migration and other demographic changes affecting their respective countries, and severity of the housing market correction.

These themes are explored in a joint research report, published by UK Finance and the Banking and Payments Federation Ireland (BPFI).  The report, UK and Irish Housing Markets: A First-Time Buyer Perspective – co-written with Anthony O’Brien, of the BPFI – argues that the financial crisis produced similar, and well-documented, adverse effects on housing and mortgage markets.  Each country has also experienced continuing tensions between government schemes seeking to promote activity in the housing market and regulatory intervention intended to ensure that the market remains sustainable.

The research provides the first detailed comparison of the UK and Irish mortgage markets and uses detailed loan-level data from UK Finance and the BPFI to profile first-time buyer borrowers in the two markets.

A common challenge in both countries is a continuing shortage of housing supply.  But, despite this, first-time buyer activity has been growing since 2011 in the UK and since 2013 in Ireland.

First-time buyers remain vital to the health of the wider housing market.  As well as continuing to sustain home-ownership, they provide liquidity in the market and enable existing home-owners to move and to create housing chains. Recent developments affecting first-time buyers in the UK and Ireland include:

  • demographic factors that have implications for the scale and nature of housing demand, with older people accounting for a growing share of the population, and major life events prompting household formation – particularly marriage and childbirth – occurring later in life;
  • the failure of housing supply to keep pace with demand, with housebuilding and sales activity still recovering from the collapse at the end of the last decade;
  • changing lender risk appetites and practices after 2009, and tighter mortgage regulation to reduce demand and limit lenders’ exposure to losses from 2014;
  • a lack of liquidity in the housing market resulting from some existing home-owners being unable or unwilling to move; and
  • government housing schemes to support supply, although these schemes have more explicitly targeted first-time buyers in Ireland than in the UK.

Key findings from UK Finance and BPFI loan data include:

  • the age distribution of first-time buyers in the UK remained broadly unchanged between 2004 and 2016, while in Ireland there has been a large fall in the number of young first-time buyers;
  • first-time buyers in the UK have extended average mortgage terms since the financial crisis, but in Ireland terms have contracted;
  • high loan-to-value (LTV) borrowing (95% and above) continues to be largely absent from both markets;
  • there is evidence of loans bunching just below macro-prudential limits on loan-to-income in both countries – 90% LTV and 3.5 loan-to-income (LTI) in Ireland; 4.5 LTI in the UK – with lending above the limits imposed by regulation falling; and
  • higher LTI borrowing focused in the capital cities of London and Dublin (where, of course, property prices are higher).

Another challenge is that the shortage of housing supply in both the UK and Ireland means that prospective first-time buyers are also potentially competing for properties with movers who have acquired housing equity, and with private landlords – but creating a favourable environment for first-time buyers must also mean addressing the needs of other purchasers and households in general.