With the mortgage market in 1988 mode, it’s time to modernise the personal investment landscape.

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With the mortgage market in 1988 mode, it’s time to modernise the personal investment landscape.

The S&P index has risen by over 20% this year and funds linked to it have followed. €20,000 invested in January 2023 would have risen to over €24,000 as of last night. Compared to what one might expect to earn on a deposit account in any of Ireland’s savings houses, it’s an extraordinary rate of return. Of course, it does carry risks, all investing does. This is why time is important. But indices such as the S&P 500 have a long-term track record of positive yields, it’s the short-term that can be challenging. That said, €20,000 invested in late 2021 would have still yielded a very strong rate of growth. It’s one of the places Irish people can access some well-diversified investments and realise some real investment growth potential.

Traditionally, a primary means of building financial security for many people across Ireland was to purchase a home or save into a private pension. Sadly, on the home front, this is increasingly not an option for tens of thousands of people each year.

In 2023, at the current rate of mortgage lending, Ireland is on course to have about 36,000 mortgages drawn down. This is based on the most recent mortgage drawdown data published by the Banking & Payments Federation of Ireland (BPFI) which includes Q1 – Q3 figures. (Note – this includes loans originated for First-time Buyers, Second-time buyers and Buy-to-Let. The reason top-up loans and switchers are excluded in this analysis is because those categories did not exist (or were not counted) when mortgage records began in 1970. So, to ensure the data comparison is accurate and relevant, only the primary lending categories are focused on.)

To put the current level of mortgage lending into perspective, one must go all the way back to 1988. In that year, 36,939 mortgages were drawn down. The figures are based on data published at the time by the Department of the Environment.

In 1988, there were approximately 3.5 million people living in Ireland. It was a time of severe economic hardship. Emigration was rife and jobs were scarce.

Fast forward to 2023 and the economic landscape could not be more different. Yet, the mortgage landscape remains the same.

At another level, the population of Ireland has exploded past the 5 million mark and is still surging. And to put this into context, even if Ireland was managing to stay up with the level of lending that was being done in 1988, we should, at a minimum be seeing at least 54,000 mortgages in 2023, not the 36,000 that the country is on course for.

It is for this reason the options to build financial security must be broadened. If people cannot access homes to buy or mortgages to fund those homes, then the options by which they can build financial security must be reimagined. The most obvious is through diversified investing.

Presently, the tax paid on investment fund gains is a whopping 41% (its 33% on other capital gains). Additionally, even though Ireland is currently home to the largest concentration of exchange traded funds (ETFs) in the EU, for locals, it is very much a ‘them’ and ‘us’ situation. When it comes to some investing, Ireland is very much a gated community with locals severely restricted from enjoying the benefits on offer.

For many reasons, it is time for a meaningful overhaul of the personal investing landscape. This includes the rate of tax including the tax-free threshold.

These changes will allow more people to build an alternative amount of financial resilience that is currently out of reach through the purchase of a home.   

Frank Conway is the Founder of MoneyWhizz

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