Mortgage lending fell 57% in last quarter of 2008, says IBF


NEW MORTGAGE lending fell by 57 per cent in the last quarter of 2008, according to the latest banking sector figures.

The total value of mortgages drawn down in the final three months of the year was €3.5 billion, down from €8.28 billion in the same period in 2007, new figures from the Irish Banking Federation (IBF) show. The number of mortgages issued tumbled by 50 per cent to 18,709.

“The recorded slowdown in mortgage market activity reflects the overall economic environment and the very challenging situation that prevails,” IBF chief executive Pat Farrell commented.

Average loan sizes fell across all segments of the mortgage market, which the IBF said reflected the fall in national house prices. The average loan issued to first-time buyers was €226,041, compared to €243,323 a year earlier.

The figures confirmed that the residential investment letting segment of the mortgage market contracted sharply. Just over 2,000 loans were issued for buy-to-let investors, down from 4,925 in the same period a year earlier.

Mr Farrell noted that recapitalised banks have committed to providing an additional 30 per cent capacity for lending to first-time buyers in 2009. He estimated that this would boost the number of first-time buyers from 20,000 in 2008 to roughly 26,000 this year.

However, this is dependent on confidence improving amongst potential buyers. “The big imponderable is sentiment,” he said. “Will people take a view that there is value in the market?”

When asked if the banking sector owes an apology for irresponsible activities, Mr Farrell said “we have made mistakes as a sector”. Those who are responsible must be held accountable, he said.