Mortgage approvals for first-time buyers reach highest level since 2011, new figures show

More home mortgages were approved for first-time buyers in May than in any other month since 2011, new figures show.

The Banking and Payments Federation of Ireland (BPFI), the banking industry’s representative body, said a total of 4,928 mortgages were approved in May with an overall value of close to €1.4 billion.

This was a 26.4 per cent increase on the number approved a month earlier, while the value of loan approvals had risen by 25.1 per cent month-on-month.

The BPFI said home loan approvals for first-time buyers reached their highest levels in more than a decade as mortgages are still more affordable than rents in some cases, even with higher interest rates.

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On an yearly basis, the volume of overall mortgage approvals declined 4 per cent while the value of new mortgages slumped by 8 per cent amid a steep 72 per cent decline in remortgaging and switching activity over the previous 12 months.

Bucking the trend, some 3,170 mortgages were approved for first-time buyers (FTBs) in May, up some 20 per cent on the same month last year and up 31.2 per cent month-on-month. BPFI chief executive Brian Hayes said May was the busiest ever for such mortgage approvals in terms of both volume and value.

It meant “the annualised value of FTB approvals surpassed €8 billion for the first time since the data series began in 2011, at €8.06 billion”, Mr Hayes said, representing a “strong pipeline for FTB drawdowns later in the year”.

While first-time buyers are normally the largest cohort active in the market, Trevor Grant, chairman of the Association of Irish Mortgage Advisors, said the “resilience” of the economy and a shortage of properties for rent were forcing more people to try to climb on to the ladder.

“There’s a lot of people in very good jobs earning well and there’s a severe lack of rental property,” Mr Grant said.

Despite rising interest rates and the tightening of approval standards by banks, Mr Grant said: “First-time buyers are still largely qualifying even on the higher rates and for a lot of them, even at 3 per cent [interest] or 4 per cent, is still cheaper than the rent they’re paying.”

[ How to buy your first home in Ireland: The three hurdles to overcome ]

[ Typical income of first-time buyers of new homes in State above €90,000 ]

But the surge in approvals may not necessarily result in a proportional increase in drawdowns, said Martina Hennessy, managing director of online mortgage broker Doddl.

“The vast majority of our clients seeking approval do not have a property identified,” Ms Hennessy said. “While approvals have increased, the issue of availability of property still persists and, as demand outstrips supply, many of these applicants who are approved will take up to six months to secure a home.”

Ms Hennessy said that the increase in loan values may relate to changes made to the Central Bank of Ireland’s mortgage lending rules earlier this year. “This increased borrowing capacity plus the lack of affordable homes means first-time buyers are seeking to borrow more to purchase a home,” she said.