Mortgage market recovery 'years away'
Published 17/08/2011 | 05:00
IT could be years before the mortgage market recovers, economists said yesterday.
They were reacting to new figures that showed just a trickle of new home loans were issued between April and June.
Mortgage lending has seized up, with just 3,550 new mortgages granted in April, May and June.
This is half the number issued in the same quarter a year ago, and a fraction of the 41,000 issued in the same three-month period in 2007, figures from the Irish Banking Federation show.
Housing economist David Duffy, of the Economic and Social Research Institute (ESRI), said the mortgage market is unlikely to recover until consumers had some certainty about the financial hit they are set to take in December's Budget.
"We are looking at a fairly weak market this year and next year unless something big happens which can bring about certainty," Dr Duffy said.
Uncertainty around the global economy is also holding back buyers from committing to a massive purchase like a house.
Dermot O'Leary, an economist with Goodbody Stockbrokers, said the fact that there were between 100,000 and 140,000 vacant housing units in the market meant prices were due to keep falling.
It could be a number of years before the housing and mortgage markets recover, Mr O'Leary said.
Brokers insisted that the collapse in mortgage lending is largely due to banks being reluctant to lend. Director of Irish Mortgage Brokers, Karl Deeter, said banks were approving people in principle for loans but when it came to the crunch they found a reason not to lend.
But head of the Irish Banking Federation, Pat Farrell, insisted there was no demand for mortgages. He said would-be buyers were holding back because of fears about job losses, falling property prices and weak consumer sentiment.
He said lenders were being prudent by only approving mortgages for those who have the capacity to repay.
"Current activity reflects the general macroeconomic environment. In these challenging times, manageable borrowing and prudent lending are to be expected," he said.
The figures show that for the first time since 2005 someone buying their first home or moving to a larger house is now borrowing less than €200,000.