Monday 22 December 2014

Number of new mortgages rises for first time in six years

Charlie Weston Personal Finance Editor

Published 09/11/2012 | 05:00

A majority of the loans were issued to first-time buyers, who are in a scramble to close property deals before the end of the year to benefit from generous tax reliefs.

THE number of new mortgages issued has risen for the first time in six years.

Experts said it was the latest sign that the property market was stabilising.

The figures came as the European Central Bank yesterday left interest rates unchanged, although economists now expect a cut in the new year.

More than 400,000 tracker mortgage holders will benefit if the ECB drops rates from the current record low of 0.75pc.

KBC Bank economist Austin Hughes said there was a "decent chance" of a rate cut early in 2013.

A Reuters poll had shown that a majority of European analysts anticipate that the central bank rate will be cut to a new record low of 0.5pc within the next few months. And figures from the Irish Banking Federation show that close to 4,000 new home loans were granted by banks in the July, August and September period.

This is a rise of more than 10pc in mortgages issued in the same three-month period last year, and a rise of 23pc on the numbers issued in the second quarter of this year.

A majority of the loans were issued to first-time buyers, who are in a scramble to close property deals before the end of the year to benefit from generous tax reliefs.

Analysts said that although the numbers were encouraging, the level of mortgage activity was still very low.

In the first nine months of the year almost 10,000 mortgages were issued, with most of these going to new buyers and existing homeowners who are moving to a new property.


Economists said the latest mortgage statistics were another sign that the property market was over the worst.

Goodbody Stockbrokers economist Juliet Tennent said: "This improvement in activity echoes the increase in the number of property transactions reported by the new property register and supports the stabilisation in house prices seen recently.

"However, mortgage relief for first-time buyers is likely to be encouraging this segment of the market and it remains to be seen if these positive trends continue after the end of 2012 when the relief is due to expire."

A stabilisation of the property market would allow banks and households to recover and generate the growth needed to pay off their debts.

Figures last week from the Central Statistics Office showed that house prices rose by 0.9pc in September, the fastest monthly growth recorded in five years. The Professional Insurance Brokers Association (PIBA) said the biggest impediment to people taking out mortgages was a lack of willingness to lend by banks.

Rachel Doyle, of PIBA, said seven out of 10 brokers responded in a survey that banks were not lending.

And she warned of the negative consequences arising from the end of the Government's bank guarantee.

"It will mean that whatever about now, once the banks are free of the guarantee, they will rush to increase interest rates. That will have a dampening effect on the market.

"While in a normal market interest rates do rise and fall, the likelihood is that the banks will rush to recover profitability regardless of the consequences on consumers -- unless severe pressure is applied by Government and the Central Bank."

Irish Independent

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