Collapse of lending for new mortgages is gathering pace
Published 01/12/2010 | 05:00
THE collapse in the mortgage market has gathered pace with a further fall in lending to home buyers, new figures show.
The value of mortgages given out in July, August and September has crashed by more than 40pc when compared with a year earlier.
Just 7,261 people took out a mortgage in the three months at the end of the summer, compared with almost 55,000 for the same three-month period at the height of the housing boom in 2006.
First-time buyers and those moving house continue to take a bigger share of the smaller mortgage market, the data put together by the Irish Banking Federation and consultants PwC indicates.
First-time buyers now account for just over four out of 10 of all mortgage loans.
The investment, re-mortgage and top-up segments of the market have all shown falls in value and market share.
Banking federation chief executive Pat Farrell admitted the figures showed that new mortgage lending activity remained subdued.
"The market is now predominantly supporting the process of home formation," he added, referring to the increased share of the market taken up by home-buyers, as opposed to investors.
The value of the mortgages drawn down in July, August and September of this year was just €1.2m. This compares with €11bn in the third quarter of 2006.
Director of the Irish Mortgage Corporation Frank Conway said the latest statistics showed the mortgage market continued to be wiped out. "In the third quarter 2006, there were a total of 54,623 mortgages drawn down. Today, this figure has been reduced to 7,261, a fall of almost 87pc.
"This is as much of a market wipeout as one could have feared just four short years ago," said Mr Conway.
Mr Conway said the lenders continued to court first-time buyers by offering mortgages for between 90pc and 92pc of the value of the house.
Some lenders have also made subtle changes to lending criteria for new buyers, including higher lending amounts on certain property types.
Meanwhile, separate figures out yesterday from the Central Bank showed that lending to households and business fell again in October.
The figures show that households loan repayments have exceeded new lending by €7bn in the first 10 months of this year. This reflects the fact that consumers are desperately paying down debt to protect themselves from the downturn.
The Central Bank said lending to businesses declined by 5.2pc in October from the same month last year after a fall of 3pc in September.
The figures also showed that the domestic Irish banks' borrowings from the European Central Bank increased by €2.7bn in October, bringing the total borrowed to €85.7bn.
Bloxham economist Alan McQuaid said there was very little good news in the latest figures from the Central Bank, with no sign that the trend would change any time soon.
"Until the banking sector crisis is fully resolved and things improve on the labour market front, then the supply and demand for credit will remain subdued, in our view," he said.