Mortgage activity declines as cost-of-living squeeze dampens market

The number and value of mortgages approved in July fell when compared with the previous month amid speculation that the current cost-of-living squeeze may trigger a slowdown in the State’s housing market.

Figures from the Banking & Payments Federation Ireland (BPFI) show a total of 5,255 mortgages were approved last month with first-time buyers accounting for 45 per cent of this number. The total was down nearly 12 per cent on the previous month but was up 4.4 per cent on the same period last year.

In value terms, the mortgages approved in July were worth €1.4 billion, down nearly 13 per cent on the previous month. Much of the activity in July was driven by non-purchase mortgage activity, which includes switching and top-ups. This category grew by 95.8 per cent in volume terms year on year to 1,741, and by 147.6 per cent year-on-year in value to €441 million.

The BPFI figures came as the rate of increase in property prices nationally slowed in May to 14.4 per cent, extending a pattern of deceleration recorded in recent months. While the headline rate of house price inflation remains very strong, a sequence of interest rate hikes planned by the European Central Bank is expected to dampen demand in the coming months and the July mortgage approval figures may be the first signal of this.

The best way to finance a new car

---

French investor pays €28.6m for Dublin and Kilkenny investments

---

Tricky judgments on when to reduce interest rates

---

Wild Duck theatre and pub in Dublin’s Temple Bar seeking €8m

---

The ECB surprised investors last month with a 50-basis-point rate increase on the back of fears that inflation was becoming entrenched in the euro area economy. With headline data pointing to a further increase in core inflation, another rate hike in September is seen as a done deal.

“Our latest mortgage data is showing continued growth in mortgage activity which is being driven mainly by non-purchase mortgages — primarily those who are remortgaging or switching,” BPFI chief executive Brian Hayes said.

“Looking at the annualised figures which allows us to more accurately assess emerging key trends, there were there were 55,689 mortgage approvals in the 12 months ending July 2022, valued at €14,753 million. This represented a volume increase of 0.40 per cent and a value increase 1.17 per cent of compared with the twelve months ending June 2022.”

“Non-purchase mortgage activity, most of which is switching, has increased sharply since May, reflecting both the competition in the market and the fact that mortgage customers continue to shop around for better rates,” he said.

“We welcome the fact that mortgage customers are actively taking steps to minimise the impact of the ECB’s planned interest rate increases, whether they switch to another mortgage lender or renegotiate with their current lender.”

Central Bank data shows that that the value of housing loans renegotiated at interest rates fixed for more than one year jumped to €1.2 billion in the second quarter of this year from €0.7 billion in the same period of 2021.