Mortgage lending tumbled by almost 50% last year

MORTGAGE LENDING fell by almost 50 per cent last year, reflecting the impact that the wider economic situation has had on the mortgage sector.

In total, 46,000 mortgages were issued in 2009, at a value of over €8 billion. The overall mortgage book now stands at €148 billion, according to the Irish Banking Federation’s mortgage market profile.

Close to 10,000 new mortgages were issued in the fourth quarter of 2009, a decline of 18 per cent on the previous quarter, totalling €1.76 billion. The number of mortgages drawn down in 2009 declined by almost 60 per cent on the 2008 figures.

The percentage of mortgages relating to residential investments and remortgages has fallen consistently since 2007. In contrast, 70 per cent of all mortgage credit went to home purchasers last year.

First-time buyers now comprise the largest share of the mortgage market, with 35 per cent of market volume and 41 per cent of its value.

The average values of mortgages issued are back to levels last seen in early 2005.

However, the value of mortgages sought by first-time buyers have not decreased in line with the drop in property prices.

“Rather than decreasing the size of their loan as you’d expect with house prices falling, they’re probably going that extra mile looking for better located, better positioned properties and they’re prepared to go the extra mile to get the bigger house in the better location,” IBF chief executive Pat Farrell said.

Market analysis shows that the rate of decline in the number of draw-downs on loans has slowed in the past two quarters.

“The consensus now, if you pull together all the different forecasts, would be that house prices have dropped by close to 50 per cent, so I think that people are beginning to come back into the market again.

“Certainly the house purchaser market segment is taking up as much of the action as it can at the moment, so I think that’s a sign that maybe things are beginning to reach the bottom,” he said.

However, he cautioned that whether the trend continued remained to be seen. “Even if it does pick up, it will be very modest because the market . . . isn’t going to grow at anything like the size it was in previous years in the foreseeable future.”

He noted that the level of approvals and applications for home loans was running at about 10 to 15 per cent ahead of the actual number of draw-downs.

“There’s still quite a cohort of people who are going around with an approval in their pocket but they still haven’t made a move to buy a house,” Mr Farrell said.

EBS has grown its share of the retail mortgage market to 21.3 per cent – a 7 percentage point increase since 2008. Its share of the overall market has grown to 17 per cent, while the building society’s market share in the first-time buyer segment has grown to 44 per cent, up by over a quarter on the previous year.

He said the building society had seen an increase in the level of mortgage applications among first-time buyers so far in 2010.

“This suggests that some potential buyers have decided that now may be the time to get into the market,” he said, adding that the index showed that the average proportion of net income required to fund a mortgage has fallen by more than 50 per cent in the past three years.