Home-loan lending sinks to lowest level ever recorded
Published 18/05/2011 | 05:00
THE mortgage market has collapsed to one of the lowest levels since records began.
Just 3,259 mortgages were issued in the first three months of this year. This is half the number of home loans drawn down in the same three months last year, and around 44,000 less than at the peak of the boom in 2006.
The mortgages issued in January, February and March of this year went mainly to first-time buyers and home movers, according to the Irish Banking Federation (IBF).
Analysts blamed the mortgage meltdown on the fact that buyers were unable to get finance, while others considering buying were holding back until house prices stop falling.
IBF chief executive Pat Farrell insisted that lenders were not seeing any demand for mortgages, due to uncertainty about the economy, price trends and future interest rate increases.
"The economic situation remains challenging and prudence remains the order of the day," he said. "For customers, that means manageable borrowing, and for financial institutions it means prudent lending."
But director of the MoneyCoach personal finance website, Frank Conway, said it was impossible for all but a minority to get mortgage approval.
The property market had seized up and could fall further this year, he added.
Over the course of the year the value of all mortgage drawdowns may not even reach €2bn. This compares with €41bn a year at the market peak.
"This is a meltdown of epic proportions and the trend is showing little sign of abating," Mr Conway said.
Uncertainty over whether first-time buyers will continue to get mortgage tax relief, worth up to €31,000 over seven years, has also unsettled the property market, analysts said.
Other experts pointed to a conflict in state policy: the Government was encouraging lending by banks but the Central Bank was pressing lenders to shrink loan books to improve their financial positions.
Irish Brokers' Association head Ciaran Phelan said potential home buyers were being starved of credit.
"The banks were actually lending more to Irish consumers before they were recapitalised," Mr Phelan said.
"If this rate of mortgage lending continues for 2011, we'll be doing well to hit €2bn, representing a 95pc drop in mortgage advancements when compared to the peak of €41bn."
The IBF figures show that just €544m worth of mortgages were issued in the first three months of the year. This was 53pc lower than the value of mortgages issued in the first three months of 2010.
It also revealed that first-time buyers and mover purchasers continue to dominate the market and account for 77pc of the value of mortgage lending.
The IBF has been compiling figures on mortgage lending for six years, but the loans levels are now at their lowest recorded in that period.