Tuesday 24 April 2018

Gap emerges between numbers approved for mortgage and those drawing one down

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Charlie Weston

Charlie Weston

A BIG gap has opened up between the numbers getting approved to take out a mortgage and the numbers who end up drawing one down.

Experts said this reflects the chronic shortage of properties for sale.

Banking and Payments Federation figures show that more than 8,000 people were approved for a mortgage than actually drew one down in the year to June.

Both approvals and drawdown numbers continue to rise.

In the last year more than 35,000 potential buyers were approved for a mortgage.

However, over the same period the number actually drawing down a mortgage were just over 27,000.

Economist with Goodbody Stockbrokers Dermot O’Leary commented: “Both approvals and drawdowns are clearly rising, but a mismatch is now opening up as approvals grow at a faster pace.

“In percentage terms, this is the biggest gap since the data began in 2011.”

The disparity between approvals and mortgage drawdown reflects the shortage of properties for sale, and the fact that buyers tend to get approval from a number of lenders when they are trying to buy in the hope that some lenders will offer them a higher mortgage than others.

Mr O’Leary said: “The scarcity of new supply coming to the market, relative to demand, is likely to be the main reason for this trend. In this environment it is inevitable that price inflation has accelerated.”

The figures from the Banking and Payments Federation Ireland (BPFI) show that 8,000 mortgages were drawn down in the April to June period.

These had a value of €1.65bn, and represents a 17.6pc rise in the number of loans compared with a year ago.

First-time buyers are driving the rise in the mortgage market. They have been boosted this year by the relaxation of the deposit rules from the Central Bank and the introduction of the Government’s help-to-buy scheme.

New buyers accounted for half of the number of mortgages issued.

Combined, first-time buyers and mover-purchasers accounted for 85pc of the total value of mortgages drawn down.

Some 4,318 buyers were approved for a mortgage in June.

Mortgage switching activity has picked up, but it is coming off a very low base.

This is despite a huge disparity between the variable rates offered by different banks, and incentives like cash back and contributions to the legal costs of switching.

Just 675 mortgages were switched in the April to June period. This was up 37pc on the year, but represents just 10pc of overall mortgage market activity.

This week the Central Bank said it was considering changing the rules to force banks to make it easier for homeowners to switch mortgage.

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