Mortgage approvals soar but would-be buyers wait on supply
NEW figures show the scale of pent-up demand among would-be home buyers with approvals running well ahead of mortgage drawdowns.
Figures from the Banking and Payments Federation, which represents lenders, show that 8,577 new mortgages to the value of €1.884bn were drawn down by borrowers during the first quarter of 2019.
First-time buyers remain the main driver of mortgage lending in the first three months of this year, accounting for 47.3pc of all loans drawn down and 47.9pc of the value of borrowing.
Separate figures show there were 4,142 mortgages approved in March, more than half for first-time buyers.
Approval are up 22.8pc compared to March last year. The number of mortgage approvals has raced ahead of drawdowns in recent years as first time buyers in particular have struggled to find homes to buy amid tight supply and constrained lending rules.
The figures also show a rose in the number of re-mortgages and mortgage switching approvals, a trend pushed by regulators keen for consumers to avail of potentially lower costs.
“The number and value of mortgages actually drawn down by borrowers during Q1 2019 show good growth on corresponding 2018 activity,” BPFI’s director of Public Affairs, Felix O’Regan, said.
“This reflects the appropriate response by lenders to increased demand for mortgage finance. Furthermore, the uplift in the number and value of mortgages approved in March indicates that further growth in drawdown activity can be expected,” he added.
Increase in value and volume of mortgages drawn down
There was an 8.9% increase in the number of mortgages drawn down in Ireland in the first quarter of this year, according to the body representing the banking, payments and fintech sectors.
Figures published by the Banking & Payments Federation Ireland show 8,577 new mortgages, to the value of almost €1.9bn, were drawn down during the first three months of 2019.
It represents an 8.9% increase in volume and a 10.6% increase in value compared to the first quarter of last year.
While it represents a decrease on the final quarter of 2018, BPFI say traditionally Q1 is the weakest quarter in any year and Q4 is the strongest.
First-time buyers remain the single largest segment by volume (47.3%) and by value (47.9%).
BPFI has also published figures showing the latest rate of mortgage approvals, with 4,142 approved in March of this year.
2,114 of these – 51% of the total – were first-time buyers.
The number of mortgages approved rose by 22.8% year-on-year and by 23.1% month-on-month.
Mortgages approved in March 2019 were valued at €920m – of which FTBs accounted for €473m (51.4%) and €266 million by mover purchasers (28.9%).
The value of mortgage approvals rose by 20.7% year-on-year and by 21.6% month-on-month.
Significant increase in the number of new mortgages approved in Febraury
New figures show there was a significant increase in the number of new mortgages approved by banks in Ireland last month.
According to the data from the Banking and Payments Federation of Ireland, the number of mortgages given the green light during the month rose 7.2% compared to the same month a year earlier.
An increase of 10.8% in the number of approvals was recorded compared to January of this year.
In total, home loans worth €757m were given the go-ahead during February, up nearly 13% compared to January and almost 10% versus a year earlier.
First-time buyers accounted for a little over half that amount with mover purchasers making up nearly a third of the total value.
The data also shows that re-mortgage and switching approvals rose on a year-on-year basis by 1.8% in volume and by 4.3% in value terms.
There were 45,775 mortgages approved in total over the 12 months to the end of February and those loans were valued at €10.175bn.
Despite the strong month, across the year total annualised mortgage approval activity only increased in volume by 0.50% and by 0.66% when it come to value.
Lenders say law ‘will push up mortgage lending rates’
LEGISLATION to regulate the sale of mortgages to vulture funds will push up interest rates on home loans, the Banking and Payments Federation said.
And the No Consent, No Sale bill will also make it harder for banks to raise finance to fund mortgage lending.
This will constrain the amount they have available to lend to consumers, the banking federation boss said.
The Banking Federation has not put a figure on the likely rates rise, but mortgage broker Karl Deeter estimates the legislation would add €1,500 to €2,000 a year to the cost of servicing a mortgage for a typical first-time buyer.
He said mortgage rates here, which are the second-highest in the eurozone, would rise by between 0.5pc and 1pc.
The Banking Federation said the legislation would deter new entrants from coming into the mortgage market which would limit the choice for borrowers.
The bill has been promoted by Sinn Féin’s Pearse Doherty and would require the specific consent of a borrower before the sale of a mortgage to a third party.
Banking and Payments Federation CEO Maurice Crowley said the bill would have unintended consequences, particularly for those taking out new mortgages.
He accepted that people have a negative view of the banks, but insisted the legislation would be harmful for consumers, pushing up lending rates, restricting borrowing and discouraging new lenders entering this market.
“People might have a jaundiced view of the banks and we can appreciate that, but the more analysis we do the more we have concerns from a consumer perspective.”
Mr Doherty responded that the banks were “scaremongering”. He said every time legislation is proposed to protect consumers the banks claim interest rates will rise, but this has not happened as they claimed.
He claimed that it would still be possible for banks to securitise mortgages to raise funds.
Mortgage rules and Brexit cause Dublin house prices to fall
Brexit is continuing to cause uncertainty at the upper ends of the property market here.
That’s according to agent REA, which says the market has segmented into two groups – those who need to buy and those who are able to choose when they can move.
“The first set of buyers are purchasing properties under €350,000, but the latter are either cautious about values and interest rates post-Brexit and are adopting a wait-and-see approach, or cannot secure mortgage approval,” said REA spokesperson Barry McDonald.
According to REA’s Average House Price Index for the first three months of the year, average house prices nationally fell 0.16% during the quarter, from €236,287 during the last three months of the year to €235,898.
But looking at the past 12 months overall, prices across the country rose by 2.9%.
That’s significantly less than the 4.6% recorded in the year to the end of December.
According to the index, which is based on a the actual sale price of three-bed semi-detached houses, prices in Dublin city have decreased by an average of €7,500 in the first three months of the year.
The agent says mortgage finance rules are the principal cause of the 1.7% drop, which brings the cost of an average home in the capital to €437,500.
The decrease cancels out the €7,000 average increase in value accumulated by three-bed semis in Dublin last year.
“Time taken to reach sale agreed in Dublin is now eight weeks – double that of a year ago – and reflects the difficulties that people are experiencing in obtaining a mortgage,” said Mr McDonald.
“We are seeing an appreciable drop in people attaining mortgage approval – particularly for properties above €350,000 – which is creating a ceiling that is stifling the market.”
Prices remained broadly unchanged in the main cities outside of the capital, while in some of the commuter counties, including Wicklow and Louth, prices fell over the last three months, the index shows.
New mortgage lending increased to nearly €9bn last year
New mortgage lending in the Republic rose by €1 billion to nearly €9 billion last year, according to the Central Bank. This was the largest annual increase since 2009.
However, the annual total remains low by historical standards. Prior to the crash, new mortgage lending hit nearly €40 billion.
The latest figures show net lending for principal dwelling houses and buy-to-lets continued to diverge.
Lending for owner-occupier homes increased for the 11th consecutive quarter, with a positive net flow of €1.1 billion over the quarter, representing the largest quarterly increase in lending to that cohort since the series began. Conversely, lending for residential property investment declined by €661 million over the quarter.
Interest-only buy-to-let mortgages shot up at the height of the boom and became a major arrears issue after the economy fell into recession.
Fixed-rate mortgages also increased over the fourth quarter, with new drawdowns exceeding repayments by €1.8 billion.
The figures show household deposits grew by €4.1 billion, or 4.3 per cent, to just over €104 billion in 2018. This was also the largest annual increase since early 2008.
“I think what the figures tell you is that mortgage lending has picked up but is still very low by historical standards,” said Cantor Fitzgerald economist Alan McQuaid.
Strict lending rules
“It is not clear whether this is a supply or a demand issue, but the strict lending rules imposed by the Central Bank and the fact that ‘ordinary’ individuals and couples trying to buy a house are being priced out of the market by cash investors suggests that demand is probably muted.
“This is unlikely to change until more housing supply comes on to the market. However, banks are being restrained too by the tighter regulations imposed on them by the authorities.”
Mr McQuaid also noted that deposits remained at record high levels despite the ultra-low interest rates.
“This suggests that consumers/households remain cautious and don’t want to be over-exposed in the case of another serious economic downturn like the global financial crisis. Uncertainty over Brexit is probably also a factor here.
“But at the end of the day credit will need to flow at a much stronger level than currently if the economy is to continue to grow strongly over the long-run in a post-Brexit environment, and the housing crisis is to be seriously addressed.”
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