First-time buyer mortgage drawdowns hit highest levels since Celtic Tiger era

First-time buyers remain the most active cohort within the Irish mortgage market, drawing down €1.9 billion in home loans in the three months to the end of September, the highest third-quarter level since the Celtic Tiger era, the Banking and Payments Federation of Ireland (BPFI) has said.

New figures published on Friday by the bank lobby group show that overall, borrowers drew down 11,614 new mortgages over the three-month period to a value of more than €3.1 billion.

While this represents an annual decline of 21.8 per cent in both volume and value terms, the drop-off is largely down to a sharp decline in remortgaging and switching activity from last year when borrowers piled into fixed interest rate loans to get ahead of rising central bank interest rates.

From the start of June to the end of September, however, the number of mortgages drawn down increased 17.4 per cent while the value of loans increased 14.9 per cent, the BPFI said.

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Of the 11,614 new loan drawdowns, first-time buyers (FTBs) remained the dominant cohort, accounting for more than 60 per cent in volume terms and 61.2 per cent in value terms.

BPFI chief executive Brian Hayes said the trend is “very striking” with FTB drawdown volumes and values at their highest levels since 2006 and 2007 respectively. “In fact, about 470 FTB mortgages valued at €131 million have been drawn down per week in the first nine months of 2023 — that’s 18,324 FTB mortgages valued at €5.1 billion.”

FTBs also accounted for 62.5 per cent or €739 million of the almost €1.2 billion worth of mortgages approved by lenders in the third quarter, the BPFI said.

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Mr Hayes said the trend is particularly evident when looking at the share of new home borrowers buying new and second-hand homes. “FTBs accounted for almost 80 per cent of home mortgage drawdowns on new properties and 69 per cent of home mortgage drawdowns on second-hand properties in the third quarter of 2023,” he said. “It is also interesting to see that, notwithstanding the significant Government incentives introduced for FTBs buying new properties, their appetite for second-hand homes remains strong.”

FTBs, typically the largest cohort within the market, have benefited from changes made to mortgage lending rules by the Central Bank of Ireland earlier this year and the overall strength of the economy.

Despite banks tightening their lending criteria due to rising interest rates, mortgage brokers have said FTBs are still qualifying for home loans. However, a mismatch between demand and the supply of homes available for purchase remains evident with many borrowers seeking approval for mortgages without having identified a property for purchase.

But Mr Hayes said the approval figures suggests there is “a solid foundation for a strong end to the year”, despite an 8.2 per cent decline in approval volumes between August and September and a 22.2 per cent decline in the 12 months to the end of September.

“We can see that although the monthly volume of mortgage approvals likely peaked during the summer months, the pipeline continues to strengthen with 30,184 FTB mortgage approved in the 12 months ending September 2023,” he said. “This was a new high and establishes a solid foundation for a strong end to the year.”