Mortgage sector hit by 40% fall-off in second quarter

MORTGAGE LENDING fell by 40 per cent in the second quarter of this year as the number of new mortgages drawn down slumped to 7,827, and the average loan size dropped to €166,770, according to the latest Irish Banking Federation/PricewaterhouseCoopers (IBF/PwC) Mortgage Market Profile.

With investors now effectively out of the market, nearly 75 per cent of new mortgage loans are going to home purchasers – up from 41 per cent in the first quarter of 2008.

Although reflecting the typical seasonal trend, the volume of new mortgage lending rose slightly in the second quarter of the year compared to the first three months of 2010, up by 12.5 per cent to 7,827 loans. The total value was €1.3 billion and, when compared with the same period in 2009, mortgage lending has fallen by 38.3 per cent.

The average loan size has also continued to decline, falling to €166,770, down by 15 per cent from €196,256 in the same period in 2009.

There was some good news for first-time buyers, however, as the average first-time-buyer loan fell below €200,000 to €193,000 – a level last recorded in the second quarter of 2005 – reflecting lower house prices.

According to Pat Farrell, chief executive of the IBF, the latest survey shows a “decisive shift in the composition of the mortgage market away from top-ups and residential investors”.

Indeed, first-time buyers now account for the largest share of the market at 38 per cent, up from 33.5 per cent in the first quarter of the year – the highest level since the survey began in 2005.

When those trading up are added to the equation, home purchasers – first-time buyers and mover purchasers – account for almost 75 per cent of new mortgage lending by value, and almost 60 per cent by volume.

The survey also points to the effective disappearance of investors from the residential property market – at least those who need to borrow to fund purchases.

There were just 284 residential investor mortgages, worth €49 million, drawn down in the second quarter of the year, representing about 3.5 per cent of the total mortgage market.