Mortgage switching slumps 65% in April as ECB rates are hiked

Irish remortgaging and mortgage switching activity slumped almost 65 per cent year-on-year in April, following heightened activity in this area of the market for much of last year as borrowers piled into fix-rate products amid rising central bank rates.

Some €73 million of switching or remortgage deals were approved by lenders in the market for the reporting month, down from €206 million a year earlier and a peak of €475 million in October as the European Central Bank was in the middle of aggressive rate hikes.

The volume of switching mortgages approved declined by 63.5 per cent in April to 283 firm offers, according to Banking & Payments Federation Ireland (BPFI).

Total mortgage approvals fell by 9.4 per cent by volume, to 3,899 cases, and 4.3 per cent by value, to €1.12 billion, the data showed. First-time buyers (FTB) were a rare bright spot, with the number of such loans up 5.3 per cent and value rising 10.5 per cent to €701 million.

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The fall-off in remortgaging and loan switching follows a period in which the European Central Bank (ECB) hiked its main lending rate from zero to 3.75 per cent between last July and May in an effort to rein in soaring inflation. The ECB is widely expected by economists to raise rates on Thursday and again next month, to take its main lending rate to a peak of 4.25 per cent and deposit rate to 3.75 per cent.

Meanwhile, Irish home price inflation has continued to ease, falling to 3.6 per cent in April from 14.5 per cent a year earlier and 6.2 per cent in January, according to the Central Statistics Office.

“Our latest mortgage approval figures point to a continued slowdown in the market across almost all customer segments with the exception of FTB approvals, which continue to grow,” said Brian Hayes, chief executive of BPFI.

“FTB mortgage approval values increased to €701 million representing a growth of 10.5 per cent year-on-year in value terms and is the sixth highest monthly approvals value since the data series began in 2011.”

New Central Bank rules that came into effect in January meant that most first-time buyers can now borrow up to four times their gross income, compared to 3.5 times previously. The regulator continues to enforce a limit on most loans to second and subsequent home buyers of 3.5 times income.

Mr Hayes noted that switching activity accounted for 7 per cent of approval volumes in April, down from the most recent peak of almost 32 per cent last October.

This article was updated on June 19th to correct mortgages approved in third paragraph referred to so-called switching mortgages, not the overall market.