Number of mortgage approvals to buy homes falls compared with 2021

Data supplied by the banking industry suggests a softening in the housing market, as the number of people gaining mortgage approval to buy homes continues to fall compared with last year.

However, the overall total of fresh mortgage approvals is still on the rise, driven by a huge surge in homeowners switching and getting fixed rates to escape the cycle of European Central Bank (ECB) rate hikes.

Mortgage approvals data for August from the Banking and Payments Federation of Ireland (BPFI) show a decline of more than 21 per cent in the number of buy-to-let approvals compared with 2021, while approvals for people moving house fell 5.4 per cent.

The volume of first-time buyer (FTB) approvals in August was virtually flat compared with 2021, up just 0.7 per cent, according to BPFI’s data. Overall, FTBs accounted for about 44 per cent of the €1.51 billion of approvals in August, while movers were a little over a fifth.

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The number of mortgage switchers, however, has been more than doubling in all year, compared with 2021. The value of non-purchase approvals in August, the bulk of which is mortgage switchers, rose by 179.5 per cent compared with 2021, to a total of €474 million.

BPFI used to report switchers as a category of its own in its approvals data, but since July it bundles the number in with the figures for mortgage top-up approvals.

When asked to carve out the accurate number for switchers once again, BPFI declined for reasons of “confidentiality” in relation to the monthly figure for top-ups. Mortgage top-ups were worth about €27 million per month when it stopped reporting them separately.

BPFI said that since KBC and Ulster Bank left the market, leaving Permanent TSB, Bank of Ireland and AIB as the main players, the smaller number of banks feeding the data set meant there was “a greater risk around exposing market share” of top-ups. It initially suggested the risk was due to competition law.

However, the Competition and Consumer Protection Commission, which enforces competition law in banking, told The Irish Times it had “no issue” with the publication of market share data. BPFI later clarified it wasn’t a competition issue, but rather a need to protect “commercial data” of its members.

Daragh Cassidy, head of communications with price comparison website and broker Bonkers.ie, said the surge in switchers and those fixing is being driven by the ECB’s interest rate hikes. He suggested a “mini mortgage crisis” may be brewing if, as expected, tracker and variable rates rise further into next year.