Sunday 26 May 2019

Mortgage lending falls as demand remains weak

Alan McQuaid
Alan McQuaid
Charlie Weston

Charlie Weston

there was a drop in the value of mortgages advanced by banks last year despite the recovering housing market.

The Central Bank figures prompted mortgage brokers to question the need for new lending caps.

The statistics show that the value of mortgages issued in the 12 months to December fell by almost 3pc.

The amount of money being paid off older mortgages exceeded new home-loan lending by €2.2bn, the regulator said.

Consumers are more eager to clear existing debt, with smaller numbers prepared or in a position to take out new loans.

Merrion Stockbrokers economist Alan McQuaid said that the credit problem was not just unique to Ireland, with general weakness in lending across the eurozone.

The European Central Bank (ECB) has tried to address the problem through a number of stimulus measures.

Mr McQuaid said: "But the fundamental problem remains that the ECB is only one player on the pitch and it requires support from politicians via structural reforms and looser fiscal policy. He said measures that increase the ability of banks to lend are only effective if there is demand for credit that is not being fulfilled, but the problem at the moment appears to be as much about the lack of demand for credit as it is about the supply of credit.

"The new mortgage lending rules from the Central Bank are likely to dampen demand and supply of credit further, suggesting that bank lending will remain subdued in 2015, and still well below what the economy needs in the long run," Mr McQuaid added.

Rachel Doyle of broker body PIBA said this called into question the need for the new Central Bank loan restrictions.

PIBA believes a further dampening on mortgage lending will intensify demand for rent, pushing up prices and making it even more difficult for people to save for deposits.

"In a normal lending environment the banks should be lending in the region of €8bn to €10bn annually for mortgages. It is actually incredible that six years on from the financial crash lending for house purchase is actually declining."

"If the new rules will, as we suspect, create a further break on mortgage lending, the Central Bank must be prepared to revise them," she said.

Earlier this week, Central Bank Governor Patrick Honohan said the decision to allow first-time buyers to get approval for a mortgage with a 10pc deposit for amounts up to €220,000 was taken because these buyers were less likely to default.

Irish Independent

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