New research from economists based in the Central Bank shows that first-time buyers have lower default rates than others in the housing market.

The research appears to bolster the case for the Central Bank easing off on plans to impose strict lending restrictions on first-time buyers.

The findings from the new economic paper were issued two days after the deadline for submissions on the proposed strict new lending restrictions by the Central Bank.

However, the Central Bank denied that the research was held back, and stressed the findings in the research paper were the personal views of the authors and not the official views of the Central Bank.

“The timing of its publication has nothing to do with the consultation process,” a spokeswoman said.

The research paper found that “first-time buyers default less”. This is in line with other findings in similar studies, the academic paper said.

The authors gave a number of reasons for this, including the fact that new buyers do not have a credit history.

The economists suggested that banks may apply stricter lending criteria to first-time buyer loans than to other mortgage holders.

Better credit allocation outcomes are the outcome of this, the researchers said.

The study also suggests that as first-time buyers may wish to move in the future and are worried about the impact of defaulting on any future transaction, so they try harder to keep up with mortgage repayments.

Most of the time they are also usually younger and are earlier in their income lifecycle and so their future income growth prospects are potentially higher.

“If a mortgage is serviceable early in the income lift cycle, then future income growth should give additional scope to meet obligations over time,” the economic letter stated.

Second-time buyers, and those who have moved more than twice, may have a higher risk tolerance. This means they take on levels of lending that more cautious new buyers will avoid.

Mortgage books of AIB, Bank of Ireland, Permanent TSB and EBS were looked at.

The new research comes two days after the Central Bank got 157 responses on plans to impose rules that mean most new buyers will have to have large deposits.

The rules have been criticised by the Department of Finance. It said house buying will become the preserve of the wealthy and those on high incomes if restrictions on mortgages are introduced.

Irish Independent