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Buyers will return to house market but prices will keep falling -- expert

PEOPLE will return to buying homes but house prices will continue to fall, according to an expert who has correctly predicted home-loan trends for the last two years.

Karl Deeter of Irish Mortgage Brokers said there was likely to be a pick-up in property lending this year.

But while houses will begin to sell again, prices should continue to fall, with drops of between 13pc and 18pc this year.

He correctly forecast last year that fixed rates would be restricted and that variable rates would rise in 2011, among a number of other forecasts he got right.

Mr Deeter has predicted that lower interest rates, the budgetary boost for home buyers and more lending will prompt a revival in the market.

Some economists predict that inflation levels will allow the European Central Bank to cut interest rates as early as next week, providing instant relief for those with tracker mortgages.

Mortgage lending for last year is expected to have been at a 40-year low, with expectations that less than 12,000 property loans have been given out.

But Mr Deeter expects a pick-up this year, with a prediction that banks may be freed up to do more lending.

They will be boosted by having their loss-making tracker mortgages transferred to former Anglo and Irish Nationwide, Irish Bank Resolution Corporation (IRBC). This would make the likes of AIB, which has had EBS merged into it, and Permanent TSB more attractive as buy-out propositions.

"Doing this with a tranche of trackers could be a tactical move by the State to make those banks more marketable," Mr Deeter wrote in 'Mortgage Market Trend Outlook 2012'.

Mr Deeter denied he was predicting an uplift because he was a broker. He stressed that it was the first time in half a decade that he was upbeat about home-loan lending.

A further fall in prices would mean the plunge in values from the peak of the market would be between 46pc and 60pc.

The report quotes figures given by the Central Bank to the IMF that show that some 150,000 mortgages are either in arrears or have had to restructure their payments.

But, according to Mr Deeter, between 6,000 and 12,000 mortgage holders can pay, but won't.

Known as strategic defaulters, these people have made a conscious decision to pay off other debt, or are under-paying on the basis that they will get a better deal from their bank on restructuring their repayments.

Banks have estimated to Mr Deeter that between 10pc and 20pc of those in arrears or with restructured repayments are in the 'won't pay' category.

The report estimates that around 25,000 mortgages could be unsustainable -- the borrower will never be able to meet the repayments. These people will have to take up planned state schemes to allow them to hand over their homes but continue to live in them and pay rent.

Fixed rates are set to remain expensive this year, while standard variable interest rates for existing borrowers will come down to between 3pc and 4pc, Mr Deeter said.

Irish Independent