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Tuesday 23 September 2014

Another drop in mortgage lending as just 15,000 handed out in 2013

Charlie Weston Personal Finance Editor

Published 25/02/2014 | 02:30

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There has been a fall in the number of mortgages issued last year Picture posed/ Thinkstock

'A normally functioning market should be lending somewhere in the region of between €8bn to €10bn'

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MORTGAGE lending has fallen again despite a pick-up in property prices.

New figures show there was a drop in the number of new mortgages issued last year.

Just short of 15,000 new mortgages were given out by the banks in 2013, the Irish Banking Federation said. This is down almost 900 on the figures for 2012, according to the banking body.

And the total number of home loans issued last year is more than 30,000 fewer than in 2009 – two years into the property price collapse. The value of the mortgages issued was €2.5bn in 2013, down 5pc on the total amount issued in the previous year.

Noel Brett of the Irish Banking Federation said: "While the figures do show a year-on-year decline, this comes as no surprise, resulting as it does from the surge in activity in the fourth quarter 2012 ahead of the expiration of mortgage interest relief."

Mr Brett said his organisation would be encouraging policy-makers to ensure there was a greater supply of homes for sale.

A massive shortage of homes for sale has prompted the Government to prepare a raft of measures aimed at increasing the supply of housing and creating 60,000 jobs in the construction sector.

Economists said the fall in the number of mortgages issued by banks was well below what had been expected.

The low numbers also reflect a shortage of homes for purchases, particularly in urban areas, and large numbers of cash sales.

Goodbody Stockbrokers economist Dermot O'Leary estimates that close to half of all house and apartment purchases last year were for cash.

He had expected banks to lend around €4.5bn in mortgages last year, based on targets set by AIB, Bank of Ireland, Ulster Bank, Permanent TSB, EBS and KBC Bank.

"Given the targets set out by the banks at the end of 2012 – close to €4.5bn – the final 2013 figure is underwhelming and can be partly explained by the low level of supply of properties and the presence of cash transactions," Mr O'Leary said.

He said that there was a rush to buy properties at the end of 2012 as tax relief was abolished for those who bought beyond the end of that year.

Rachel Doyle of broker body PIBA said the mortgage lending market was dysfunctional.

"A normally functioning market should be lending somewhere in the region of between €8bn to €10bn annually compared with the figure of €2.5bn for 2013."

First-time buyers saw the largest decline in the number of mortgages issued, but there was a slight rise in loans issued to mover-purchasers.

The average mortgage size in the last three months of last year was €172,000, Irish Banking Federation figures show.

Mr O'Leary expects mortgage lending to rise this year. Some €3.3bn worth of mortgages will be loaned out this year, and this will rise to €4.2bn in 2015, Mr O'Leary estimates.

This would work out at 18,600 mortgages being given out next year, and 23,000 in 2015.

Irish Independent

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