Mortgage lending at highest level since January 2011

IBF says average approval value was €179,012 in June, up by 5.5 per cent

Mortgage lending is on the rise again, albeit off a low base, with home purchasers borrowing an average €185,538 to buy a house in June. Photograph: Brenda Fitzsimons / The Irish Times

There was continued momentum in the mortgage market in June, with the number of mortgages approved up by 41.5 per cent on a year-on-year basis. The value of these mortgages was up by 49.3 per cent on a value basis, reflecting the increase in property prices over the past year.

According to figures from the IBF, a total of 2,268 mortgages were approved per month, on average, in the three months ending June, with an average monthly value of € 406 million, up from €358 in the previous month, and from €272 million in June 2013.

In volume and value terms, mortgage approvals in Q2 2014 were at their highest level since the series began in January 2011, with the value of mortgages exceeding €400 million for the first time since the series began.

Despite the gains however Dermot O’Leary, chief economist with Goodbody Stockbrokers, says that mortgage lending, which totalled €2.5 billion in 2013, remains well short of a “normal” level of about €8 billion. However, he forecasts growth of over 30 per cent this year, “which will go some way towards returning new lending to these normal levels”.

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Meanwhile, the Society of Chartered Surveyors Ireland (SCSI) has published a ten step housing strategy document which it says will help deal with the supply shortage which exists in Dublin and other urban areas.

The measures include the introduction of a Builders Finance Fund, a reduction on VAT for new home construction, the establishment of a Revolving Infrastructure Fund (RIF) and a reduction in development contributions to local authorities for a period of two years. The society also believes that the construction of more European style family friendly apartments and the introduction of a Local Property Tax exemption for people trading down would help to reduce supply pressures.

Only 8,301 new houses were built in Ireland last year while demand is estimated to be of the order of approximately 16,000 a year, with half of those required in Dublin.

Simon Stokes, chairman of the residential group of the SCSI, says that the creation of a RIF could help boost supply.

“RIFs are not grants or subsidies but a smart way of providing financing for developments. Once they’ve been repaid the money can be reinvested to pay for infrastructure on further projects,” he said.

Fiona Reddan

Fiona Reddan

Fiona Reddan is a writer specialising in personal finance and is the Home & Design Editor of The Irish Times