Growth rate of mortgage approvals slows in November

Mortgage approvals slowed in November but the numbers over the past 12 months are still running 25 per cent ahead of this time last year. And, in value terms, the amount sanctioned by lenders is 36 per cent higher.

There were 3,925 mortgages approved in November alone – up 7.3 per cent on the same month last year. That is the slowest year-on-year increase since March 2016, though Goodbody analyst Dermot O’Leary noted that November 2016 was a tough comparator month. Mortgage approvals jumped sharply at that time on rumours that the Central Bank planned to tighten mortgage lending rules. In the event, it didn’t.

In value terms, the amount approved last month was 14.9 per cent ahead of November 2016, according to the data from the Banking and Payments Federation Ireland (BPFI).

“Over the three months to November, the value of approvals grew by 22 per cent year on year,” Mr O’Leary said, “and by 12 per cent year-on-year by volume.

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“Overall, this has been a year of strong growth in new mortgage approvals in Ireland, with the number of approvals up by 25 per cent year-on-year and the value growing by 36 per cent year-on-year.”

A particular feature of the November data is the sharp rise in the number of re-mortgages and/or mortgage switchers approved. These jumped over 38 per cent on October and 44 per cent on November last year, though from a low base.

Mortgage top-ups

In percentage terms, there was also a strong rise in residential investment lending – up 13.9 per cent year-on-year – and mortgage top-ups, where the numbers approved are 21.9 per cent ahead of November 2016. But again, in both cases, this growth is from a low base and the absolute numbers are modest.

Mr O’Leary notes that just 2,000 buy-to-let mortgages have been approved over the past year, even though 11,000 buy-to-let purchases have been made in that time.

First-time buyers continue to dominate the market and drive its growth, accounting for 47 per cent of all approvals in November, although the number of applicants approved was down slightly on October.

However, in the three months to November, approvals to first-time buyers increased in value by 31 per cent over the same period in 2016.

“This trend will “slow significantly” in 2018, said Mr O’Leary. In part, that will be determined by the sharp rise this year presenting a more challenging base level. Loan-to-income caps for first-time buyers will also be tighter from January.

“In the first half of 2017, 24 per cent of new lending to first-time buyers was at a loan-to-income ratio of more than 3.5 times,” says Mr O’Leary, “but this will be limited to just 20 per cent in 2018.”

There was a fall, on an annual basis, in the number of existing homeowners approved for mortgages to move to a new home, according to the BPFI data. This cohort, which accounts for over 30 per cent of the market, was 1.2 per cent weaker last month than in November 2016.