Monday 20 February 2017

Mortgage lending drops to lowest level since 1971

Charlie Weston Personal Finance Editor

Published 22/06/2011 | 05:00

MORTGAGE lending has fallen to its lowest level in 40 years. Experts expect just 11,000 new mortgage loans to be approved this year -- the lowest level of lending since 1971.

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Analysts blamed the mortgage meltdown on the fact that many buyers were unable to get finance, while others considering buying were holding back until house prices stopped falling.

A study of mortgage statistics shows that lending is back at the level it was just before Taoiseach Enda Kenny first entered the Dail. Mr Kenny is the 'father of the Dail' as he is the longest-serving TD.

Just 3,259 mortgages were drawn down in the first three months of this year. If this trend continues there will be at most 11,000 mortgages approved for the entire year, according to an analysis by Frank Conway, director of personal finance website MoneyCoach.

He said that the last time lending was as low as this was in 1971, based on Department of Environment statistics.

"We would have to go all the way back to 1971 to match the 11,000 mortgage origination statistics and 1972/1973 to match the 15,000 figure," Mr Conway said.

He said it was shocking that lending was at such a low level considering that back in the 1970s the economy was smaller and the population was lower.

Mortgage lending is also 93pc lower than it was in 2006, he added. The market is in the doldrums because property prices continue to fall. Prices have been falling for the past 40 months.

Difficulty

Property prices in this country experienced the second sharpest fall in the world last year.

Unemployment and the difficulty in getting mortgage approval were other issues dragging the mortgage market down, Mr Conway said.

Domestic banks AIB, Bank of Ireland and EBS were approving small numbers of mortgages, while Belgium-owned KBC Bank was actively encouraging lending at the moment, he added.

Mr Conway said the time was right for a new lender to come into the market to provide funding to first-time buyers.

A spokesman for the Irish Banking Federation (IBF) said mortgage lending was weak due to the economic slump and a lack of demand.

"IBF's own figures confirm that mortgage-market activity remains weak and lenders generally continue to report subdued underlying demand for new mortgage finance," the spokesman said.

"Consumer uncertainty around macroeconomic developments, property-price trends and future interest-rate movements are key influencing factors.

"As long as the economic situation remains as challenging as it is, prudence is likely to remain the order of the day for both borrowers and lenders."

The IBF spokesman added that a recent European Commission Economic Sentiment Indicator -- which asks if consumers intend to build or buy a home in the next 12 months -- showed sentiment among Irish consumers in the second quarter of this year to be at its lowest level (-93.1) since the series began in 1990.

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