Mortgage drawdowns plummet in first drop since onset of Covid-19

The number of mortgages drawn down in the second quarter of 2023 slumped almost a fifth, the first time there has been a contraction since the onset of the Covid-19 crisis, new data shows.

A report from Banking and Payments Federation Ireland (BPFI) shows a total of 9,896 new mortgages to the value of €2.8 billion were drawn down by borrowers during the second quarter of 2023.

That was a decrease of 17.4 per cent in volume and 11.9 per cent in value on the corresponding second quarter of 2022.

A comparison with the previous quarter shows a decrease of 5.7 per cent in volume and 3.6 per cent in value.

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First-time buyers remained the single largest segment by volume (60.3 per cent) and by value (61.5 per cent).

Re-mortgage and switching volumes and values fell by 63.8 per cent and 63.1 per cent year-on-year respectively.

Separately, BPFI also published figures for June, which show a total of 4,766 mortgages were approved. First-time buyers accounted for 3,013 of these, which represented 63.2 per cent of total volume.

The number of mortgages approved in June fell by 3.3 per cent month-on-month and fell by 20 per cent year-on-year.

Mortgages approved in June were valued at €1.4 billion, of which first-time buyers accounted for €862 million (63.6 per cent).

The value of mortgage approvals fell 2.9 per cent month-on-month and 18.6 per cent year-on-year. Re-mortgage and switching activity fell by 83.2 per cent year-on-year in volume terms and by 85 per cent in value in the same period.

BPFI chief executive Brian Hayes said the data shows that demand in the market “remains strong”.

“However, overall, we can see mortgage drawdown volumes fell on a year-on-year basis for the first time since the slowdown due to Covid in 2020,” he said.

“While much of the decline reflects much lower levels of switching [down 63.8 per cent year on year in volume terms], first-time buyer mortgage volumes fell on a year-on-year basis (down by 0.4 per cent) for the first time since 2020.”

Mr Hayes also said the value of first-time buyer drawdowns increased by 7.6 per cent to almost €1.7 billion, the highest second quarter level since 2007.

“Much of the increase reflects upward trends in average mortgage values, with the average first-time buyer drawdown value reaching €284,397 in the quarter, the highest level since the data series began in 2003.

“The average first-time buyer and mover purchase mortgages on new properties both reached their highest levels since the data series began in 2005 at €325,223 and €353,657.”

On the data for June, Mr Hayes said: “We can see approval volumes fell in year-on-year terms for the fifth successive month, mainly reflecting the decline in switching activity.

“However, similar to what we’re seeing in drawdown figures, first-time buyers continued to buck the trend with 3,013 mortgage approvals valued at more than €862 million in June 2023, the second highest levels [after May 2023] since the data series began in 2011.

“It’s too early to say if first-time buyer volume growth will return in the third quarter but there were 8,600 first-time buyer approvals valued at almost €2.5 billion in the second quarter, so there is a strong pipeline for drawdowns later in the year.”