Monday 20 May 2019

Home-loans market to fall further as property values continue slide

Charlie Weston Personal Finance Editor

THE value of the mortgage market is likely to fall back to €25bn this year, from €40bn in 2006, and €34bn last year.

The fall has been blamed on the seizing up of the property market and the rise in mortgage rates.

In a briefing yesterday, Haven Mortgages said banks were trying to restrict lending, a situation which was slowing the home-loans market.

The decline in the value of the mortgage market to €25bn would represent a 25pc drop from last year's figure of just under €34bn.

A sharp reduction in housing starts was one of the reasons for the slowdown in home-loans growth. House registrations fell 77pc in the first three months of this year compared with the same period last year.

House prices fell 7.8pc in the year to February with Haven's Tony Moroney predicting another 8pc fall this year. That would mean house prices falling by 15pc from their peak in early 2007.

Haven, the EBS Building Society subsidiary which sells mortgages through brokers, said banks were not lending to each other and this was forcing banks like Royal Bank of Scotland and HSBC in the UK to raise funds in the market.

Wholesale three-month money, the rate at which banks pay for their funds, was at 4.85pc, despite the European Central Bank rate being at 4pc.

This has meant some tracker-rate margins have shot up by up to 0.5pc, and standard variable rates have gone as high as 5.89pc.

The switcher market, which had been growing steadily, has been hard hit by the withdrawal of offers to pay legal fees for switching by First Active, Ulster Bank, Permanent TSB, IIB Homeloans and Haven.

The switcher segment of the market, which hit €6.7bn last year, is also reeling from the hike in tracker rates. This situation means that many borrowers are probably on rates not to be repeated, Mr Moroney said.

Brokers would see a drop of up to €80m in their collective income this year, as a result of lenders cutting commissions or refusing to deal with them.

But Mr Moroney denied the commissions cut was about targeting brokers. "It is more about banks trying to slow down lending. They are trying to manage their balance sheets and they are using lending to control the level of business."

Mr Moroney added that banks were also applying pressure to replace tracker mortgages with standard-variable rate ones as they were losing money on trackers.

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