Thursday 22 February 2018

Four-year high for mortgage lending but still 'below normal'

THE level of mortgage lending hit a four-year high last year, and is now expected to rise again this year
THE level of mortgage lending hit a four-year high last year, and is now expected to rise again this year
Charlie Weston

Charlie Weston

THE level of mortgage lending hit a four-year high last year, and is now expected to rise again this year.

It comes as separate figures show that 200,000 boom buyers are in negative equity.

Home buyers drew down almost €4bn in mortgages last year, which was up 55pc on the previous year, new figures from lender lobby group the Banking and Payments Federation show.

This was the highest level of mortgage lending since 2010, and reflected a rush to buy at the end of last year ahead of new Central Bank lending restrictions coming into force.

But mortgage brokers said it was still below normal levels of lending, of between €8bn and €10bn a year.

Financial broker body PIBA said this indicates it was premature of the Central Bank to restrict lending.

Rachel Doyle of PIBA said: "The data proves that the new Central Bank restrictions on mortgage lending are premature to say the least."

It is expected that €5bn worth of mortgages will be drawn down this year despite new Central Bank lending rules.

However, more than half of the properties bought last year were for cash, an analysis of the data by Goodbody Stockbrokers' Dermot O'Leary shows.

There was a surge in home buyers drawing down mortgages in the last four months of last year. This was put down to new lending restrictions being proposed in October last year, which has since come into operation.

Investors were busy snapping up properties to rent out in the last quarter of last year ahead of the withdrawal of tax breaks at the end of last year.

Mortgages to the value of €1.3bn were drawn down during the final quarter of last year.

This was close to 50pc higher than the value of mortgages drawn down in the same three-month period in 2013.

Some 7,583 mortgages were drawn down from banks in the last three months of 2014, the figures from the Banking and Payments Federation and PwC show. This took the number of mortgages issued last year to 22,119. The total value of mortgages drawn down last year amounted to €3.9bn.

Average loan sizes were almost €177,000 in the last quarter of 2014, up 2.7pc from the end of 2013. For first-time buyers, the average mortgage was €220,650.

Mr O'Leary said he expects lending for homes to hit €5bn this year, despite the Central Bank requiring first-time buyers to have a deposit of 20pc for amounts borrowed over €220,000.

Other borrowers will need a similar deposit, unless they get a negative equity mortgage.

Around 55pc of property transactions in the last three months of last year were for cash, Mr O'Leary said.

The economist said that recent mortgage approval data suggest that there was a surge in activity ahead of the introduction of new mortgage caps just introduced by the Central Bank.

"With mortgage approvals lasting for at least six months, we expect this to lead to strong growth in draw downs in the first half of the year, before tailing off in the second half of this year and into 2016."

Mr O'Leary said Goodbody was forecasting growth of 28pc in new mortgage lending this year to €5bn, with a further expansion to €5.6bn expected for 2016.

"The growth achieved in 2014 is indeed positive, but it is worth noting that the market is still in recovery mode to what we believe is a 'normal' level of €8bn lending per annum," Mr O'Leary said.

Meanwhile, research from the Economic and Social Research Institute confirms that 64pc of boom-time mortgages are in negative equity - where the value of the property is less than the loan secured on it.

The ESRI said that around 214,000 mortgages drawn-down between 2005 and the end of 2012 remain in negative equity.

The majority of those in negative equity are aged 40 or under, according to the ESRI's analysis of CSO figures.

Irish Independent

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