Irish mortgage lending falls 40%

Mortgage lending fell by 40 per cent in the second quarter of this year, according to the latest IBF/PwC Mortgage Market Profile published today.

The number of new mortgages drawn-down over the period slumped to 7,827, and the average loan size dropped to €166,770.

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 to €1.3 billion in the second quarter of the year, an increase of 12.5 per cent compared to the first quarter. However, when compared with the same period in 2009, the volume of mortgage lending has actually fallen by 38.3 per cent.

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

However, there was some good news for first-time buyers (FTB) as the average loan in the sector fell below €200,000 to €193,000 , reflecting the fall in property prices.

According to the statistics, FTBs 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. This is the highest level since the market profile survey began in 2005.

When those trading-up are added to the equation, home 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 – with just 284 residential investor mortgages worth €49 million drawn-down in the second quarter of the year. This represents about 3.5 per cent of the total mortgage market and is a far cry from the heady days of the boom when investors accounted for about a fifth of total mortgage lending.

According to Irish Banking Federation chief executive Pat Farrell, the survey shows a decisive shift in the composition of the mortgage market away from top-ups and residential investors.