The share of mortgage lending to prospective landlords within total household loans has halved since the first quarter of 2020, new data from the Central Bank shows.
The contraction in the buy-to-let sector in recent years has played a key role in the housing crisis as rents have steadily risen while the number of available homes to rent has declined.
Recent data from the Residential Tenancies Board showed the number of termination notices sent by landlords in the third quarter increased by 35 per cent year-on-year. The vast majority were because the landlord intended to sell the property.
The Central Bank’s data on household debt, published on Tuesday, shows the share of lending for buy-to-let within the total has decreased from 12 per cent in the first quarter of 2020 to 6 per cent in the second quarter of this year.
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Some €8.3 billion was loaned to prospective landlords in the period, which was down from €14.5 billion in the first quarter of 2020. That represents a 43 per cent reduction in lending despite a 51 per cent increase in the median cost of a house since 2020.
That being said, lending to prospective landlords in real money terms is up year-on-year from €7.6 billion, and also up on more recent periods from €6.5 billion in the first quarter of this year and €6.8 billion on the quarter before that.
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The Central Bank data also shows landlords are increasingly going to non-bank institutions for mortgage lending, with 71 per cent coming from these groups in the second quarter.
That was the highest figure since the dataset began in the first quarter of 2020 when the proportion was 53 per cent. Looking at more recent times, the figure is up from 61 per cent on the previous quarter and 60 per cent year-on-year.
By contrast, the majority of home loan mortgages are provided by the banks, which make up 83.5 per cent of that cohort. Mortgages accounted for 77 per cent of total household loans in the quarter, with this share steady in recent quarters.
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The data shows banks are the largest domestic lenders to Irish households, accounting for €109.6 billion of the €149.1 billion outstanding loans. Home loans were the predominant loan purpose at €105.9 billion.
The overall share of household mortgages with non-bank institutions was 16 per cent of the total, with a value of €16.6 billion.
Donal Magee, senior underwriter with Núa Money, said the data confirms non-bank lenders are “a core part” of the Irish mortgage market as well as the overall household loans market, having “stepped into areas which traditional banks moved away from”.
“This is not just an Irish trend – it is consistent across the EU and US,” he said. “Non-bank lenders are ensuring more people can access mortgage credit, particularly those whose circumstances fall outside the narrow criteria of the banks.
“Returning emigrants, single applicants, older borrowers and the self-employed and others with variable income are all being served by this part of the market, in ways that banks have not always been able to.”
Mr Magee said the growth and presence of non-bank lenders “creates competition, puts pressure on banks to sharpen their offers, and broadens the range of solutions available to households”.
“Many non-bank lenders are involved across a broad swathe of the market, not just servicing niches,” he said. “Products that enable equity withdrawal are helpful to many, given rising house values and the wealth held within the housing stock.
“Today’s report reflects the reality that many households are turning to non-bank lenders because of the choice and flexibility they offer, which many traditional lenders simply do not.
“Non-bank lenders are filling a gap in the market by ensuring more people can access mortgage credit, particularly those whose circumstances fall outside the narrow criteria of the banks.”
