Mortgage drawdowns up but approvals ‘flatlining’

Banking federation report shows uptick in number of people switching mortgages

Almost 11,000 people drew down a mortgage worth an average of €220,730 in the three months to September new figures show, a sharp increase on the same period in 2017.

However, the numbers seeking approval to buy a home are “flatlining”, according to the Banking & Payments Federation Ireland (BPFI).

Drawdown figures from the BPFI for the third quarter of 2018 show that 10,873 mortgages worth €2.4 billion, or an average of €220,730, were drawn down during this period.

This was up by 14.4 per cent in volume terms and 17.5 per cent in value, on the corresponding quarter of 2017, and is up by a similar order on the previous quarter of this year.

Felix O’Regan, director of public affairs with the BPFI, said that mortgage drawdowns continue to show “strong growth” with first-time buyers driving much of this.

“First-time buyers account of the lion’s share of all drawdowns – in excess of 48 per cent in both volume and value terms,” he said.

However, the pipeline for future drawdowns seems to be shrinking, with the number seeking to get approval for a mortgage “flatlining”.

According to the report, 3,825 mortgages were approved in September 2018, with first-time buyers accounting for 47 per cent of these approvals, and trader-uppers/downers some 28 per cent.

Annual basis

While this volume of new approvals is up by 4.5 per cent on the year, it actually fell by 8.6 per cent on the month. Similarly, while the value of these mortgages rose on an annual basis, up by 4.3 per cent to €822 million for September, it too fell on the month, down by 11.6 per cent.

This means that the annualised volume of mortgage approvals, which stood at 44,805 in the 12 months ending September 2018, was only 0.3 per cent higher than the year to the end of August.

“The most recent mortgage approval figures for September show a flatlining in activity,” said Mr O’Regan, adding that this is likely explained by the impact of the Central Bank’s macroprudential measures and by challenges in the housing supply market.

It is understood that many banks have stopped offering exemptions. This may explain the slowdown in those obtaining approval, with some homebuyers waiting until the banks start offering exemptions again, either towards year-end or early next year, to obtain an approval.

The report also shows a sharp uptick – albeit from a low base – in the numbers looking to switch or remortgage. The figures show that there were 1,420 remortgage loans in the third quarter of the year worth some €325 million, up by 82.8 per cent in volume terms and 82.2 per cent in value.

Fiona Reddan

Fiona Reddan

Fiona Reddan is a writer specialising in personal finance and is the Home & Design Editor of The Irish Times