Almost 50% rise in amount of money lent for home loans

Banks and other lending institutions offered borrowers almost 50 per cent more money in mortgages in the first three months of this year than in the same period last year.

Most recent statistics from the Department of the Environment show that the national value of home-loan approvals in the 12 months up to March this year had increased by 48.1 per cent, while the number of loans approved was up by 28.6 per cent.

Despite calls for measures to cool down the housing market, banks agreed to pay out almost €8 billion to borrowers in the first three months of this year compared with just over €5 billion in the first three months of last year.

The Minister of State for Housing, Noel Ahern, said he was concerned that banks were willing to give out so much money to house-buyers.

"I'm concerned by these so-called innovative packages that the banks are offering of 100 per cent mortgages, interest-only mortgages and mortgages of 35 years and more."

He was also aware of some individuals being granted mortgages of more than 100 per cent the house price and was worried that the availability of so much money was fuelling the "hype" of the housing market.

"There is a segment of society who are buying houses that they don't necessarily need. They are buying second and third houses - future buying for their children, or buying houses off the plans hoping to sell them on at a profit and this is happening because there is too much hype in the market."

It was not yet certain the high first quarter statistics would carry on through the year. "I would be particularly worried if the amount of these increases turned out to be part of an ongoing trend," Mr Ahern said.

The increase in the amounts banks were willing to lend was reflected in the rise in house prices in the Department of the Environment's quarterly housing statistics.

The largest increase was in Dublin, where second-hand house prices increased by 17.5 per cent in the 12 months to the end of the first quarter of this year. New house prices in the capital increased by 14.1 per cent.

The trend is reflected nationally, albeit on a slightly more moderate scale, with a national increase in new house prices of 11.4 per cent while second-hand house prices increased nationally by 14.4 per cent.

"Increases in house prices ranging from 11 per cent to 17 per cent is something the market can't continue to bear for too long. Interest rates have been historically low but if they continue to go up any more there could be a lot of tears all round," Mr Ahern said.

Lending institutions should be "more prudent" about the amounts they lend individuals.

"These high mortgages are causing a lot of the increases in house prices over the last 12 months. Early last year prices were predicted to increase by only 6 to 8 per cent."

Mr Ahern said he was pleased with the level of houses built so far this year, with 36,000 houses and apartments completed up to the end of May, but he said he was concerned that the number of buildings started was down almost 4 per cent in the first three months of the year on the same period last year.

Construction began on 18,052 houses from January to the end of March this year, compared with 18,770 in the same period last year.

"We need to see how that will change over the course of the year but I am concerned and I'm beginning to wonder if some builders feel the market is going to bottom out," Mr Ahern said.