Mortgage lending picking up slightly, says banking federation

MORTGAGE LENDING picked up slightly in the second three months of the year, but it is still too early to discern a positive trend, the Irish Banking Federation (IBF) said yesterday.

The latest figures, compiled with PricewaterhouseCoopers (PwC), show that the value of new lending rose by 9 per cent in the second quarter when compared with the first three months of the year.

Annual comparisons were considerably more stark however, showing that new lending between April and June was 71 per cent lower than in the same period of 2008. The annual drop was slightly larger than the fall recorded in the first quarter, with the federation’s chief executive, Pat Farrell, noting that it was “early days” for judging a turning point in the market.

Mr Farrell also acknowledged that it was likely that more lenders would follow Permanent TSB’s move to raise its standard variable mortgage rate by 0.5 of a percentage point, as pressure grows on margins.“Margins here at the moment are not sustainable,” he said, noting that mortgages are “not a profitable business”.

Some 12,686 new home loans worth €2.2 billion were drawn down in the second quarter, compared with just less than €2 billion in the previous three months.

A year earlier, total new mortgages in the period had amounted to €7.6 billion.

The annual drop in volume terms was also stark, with the number of loans down 64 per cent year on year.

When compared with the first quarter, however, the number of loans was up by 15.4 per cent.

Mr Farrell pointed out that it was normal for the second quarter of the year to bring an uplift in the mortgage market, adding that a trend would only become evident in the third quarter.

He added that levels of inquiries about new loans were “fairly good’’. The figures show that the percentage uptick in activity between the first and second quarter this year was higher than in either of the previous two years.

Analysts at Davy were more gloomy however, describing the overall lending figures as “extremely weak”.

They pointed out that when seasonal factors were stripped out, the quarterly figures showed a drop of 22.9 per cent.

A breakdown of the figures shows that the biggest annual declines came for investors, who are now close to being absent from the market.

First-time buyers drew down 25 per cent of new loans during the quarter, while “top-up” loans accounted for almost one-third of activity.