Homebuyers getting mortgages in greater numbers despite lending rules

Mortgage approvals rose strongly in August, as the Central Bank’s restrictive lending rules did not appear to deter putative homebuyers seeking loan approval for the autumn selling season.

In the three months ending August 2016, 3,411 mortgages were approved, at a value of €682 million. This was the highest volume, and value, of mortgage approvals, including purchase mortgage approvals, since the series began in January 2011. On a year-on-date basis, approvals of €4.4 billion are now 17 per cent ahead of 2015, following a slow start to 2016.

The number of approvals rose by 25.7 per cent on an annual basis, while the value of approvals rose by 37.2 per cent. However, on a year-to-date basis, growth is more modest, with purchase volumes up by only 0.7 per cent and values up by 5.5 per cent.

The average value of mortgages fell in the three months ending August 2016, but has been rising strongly during 2016. The average FTB and mover-purchase value remained above €240,000 and € 190,000 respectively.

At the weekend, the deputy governor of the Central Bank of Ireland, Sharon Donnery, indicated a reluctance on the part of the regulator to change its strict rules on mortgage lending and warned that adopting a "fine tuning" approach could lead to financial instability.

Fianna Fáil finance spokesperson Michael McGrath said he was “disappointed” by Ms Donnery’s comments, as the rules are “denying many families the opportunity to trade up to a more suitable home”.

First-time buyers

Approvals among first-time buyers (FTB) grew strongly, up by 22.8 per cent year-on-year, with some 1,640 mortgages approved. This means that FTBs now account for almost half (48 per cent) of all mortgage market activity

Those trading up also sought approval in greater numbers, with annual growth of 25 per cent, bringing approvals up to 1,120. Combined, FTBs and trader uppers accounted for some 86 per cent of the value and 81 per cent of the volume of mortgage approvals.

Switchers

Yet again the figures show an increase in the number of homeowners looking to switch mortgage provider to avail of more competitive rates. Remortgage activity soared – albeit from a low base – by more than 100 per cent during the year, or by almost 8 per cent in the month, with 264 remortgages approved, up from 128 in August 2015. Remortgages now account for 7.7 per cent of all mortgages approved during the month, while the figures also point to strong growth in top-ups, with homeowners topping up their mortgage, perhaps to finance a home renovation project.