Seven lenders lent almost €9bn in mortgages in 2018

Seven lenders lent a total of almost €9 billion in mortgages to borrowers during 2018, which was up from €7.4 billion the year before, new figures from the Central Bank show.

The figures suggest that the Central Bank’s restrictions on mortgage lending have not dampened the flow of credit to house buyers. First introduced in 2015, the regulator’s mortgage market measures are aimed at enhancing the resilience of the banking sector.

The latest figures, which relate to 2018, show a total of 39,495 loans were originated by seven lending institutions with a value of €8.9 billion. This compares with €7.4 billion over 35,472 loans in 2017.

The average loan-to-value and loan-to-income for both first-time buyers and second-and-subsequent buyers was relatively unchanged year on year.

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The average loan to value for first-time buyers was 80 per cent in 2018, and the average loan to income was 3.1 times. The corresponding figures for 2017 were 79.7 and three times respectively.

The average loan to value for second-and-subsequent-buyers was 66.8 per cent compared with 67.1 per cent in 2017, while the average loan to income was 2.6 times, compared with 2.5 times in 2017.

Exemptions

Regarding allowances to exceed the loan-to-value or loan-to-income limits, 17 per cent of the value of first-time buyers’ lending had an allowance to exceed the loan-to-income limit of 3.5 times.

Less than 1 per cent of the value of first-time buyers lending originated above the 90 per cent loan-to-value limit.

For second-and-subsequent buyers, 7 per cent of the value of second-and-subsequent buyers’ lending had an allowance to exceed the loan-to-income limit.

Separately, 16 per cent of the value of second-and-subsequent buyers’ lending originated above the loan-to-value limit of 80 per cent. Allowances were allocated to borrowers in all quarters of 2018.

Earlier this week, ratings agency Fitch suggested Dublin’s high-end property market could be in line for a price correction as mortgage restrictions hamper demand.

It said that while prices in the market as a whole are forecast to continue growing steadily, the demand for more expensive properties “may be insufficient to avoid a price correction in this part of the market”.

Fitch is basing that assessment on the fact that just over half of newly-constructed homes sold for more than €350,000 in the first 10 months of 2018, suggesting that new builds are being targeted at high earners.

Nevertheless, the ratings agency forecast house prices to rise by 3 per cent both this year and next despite the fact that buyers are hitting the affordability barrier.

With buyers unable to finance high purchase prices and with loans limited to 3½ times income, Fitch forecasts growth in the market to cool, although it will continue to stay close to the growth witnessed in the first few months of 2019.

The Central Bank’s measures set limits on the size of mortgages that consumers can borrow through the use of loan-to-value and loan-to-income limits. The measures are reviewed annually.

Financial institutions that advance at least €50 million of new mortgage lending in a six-month period are required to submit data to the Central Bank. Based on this data, the regulator publishes an annual overview of new lending under the measures.