Lending for principal homes increase as buy-to-let dips

New lending of mortgages for principal homes increased by €182 million over the three month period to the end of June, marking the fifth consecutive quarter of growth for this type of mortgage.

Statistics from the Central Bank show borrowers are increasingly tending toward fixed-rate contracts on the basis of the current lower interest rate environment. This becomes clear by looking at the drop in floating rate loans, which fell by €612 million over the quarter. Decreases in tracker mortgages and standard variable rate mortgages are attributed with causing the dip.

Mortgages on buy-to-let properties also decreased over the quarter by €239 million meaning that total lending for house purchase has remained negative over the course of the first half of this year.

Compared to last year, buy-to-let mortgages have fallen by 8.6 per cent, or by €1.2 billion.

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Over the entirety of the second quarter drawdowns on mortgages exceeded repayments by €794 million.

Total loans for house purchase, including both on-balance sheet and securitised mortgages - mortgages pooled together for the purpose of selling debt on open markets - stood at €104.8 billion by the end of June. Meanwhile, over the first half of the year, household deposits grew by €3.1 billion.

The latest figures come as some 100,000 mortgage holders stand to benefit after AIB announced a 0.25 per cent reduction in its standard variable rate, the fifth rate reduction for existing customers in three years.

However, variable rates in the Republic are still nearly double the euro area average, according to Central Bank figures.

Based on the AIB announcement, a customer will see an annual repayment saving of €315 on a €200,000 mortgage over 25 years. At current rates this represents a lifetime interest payment saving of approximately €7,800 on the same mortgage. AIB has also added to its fixed-rate product offering with a new seven-year fixed-term rate at 3.5 per cent. The banks said this was to offer customers “medium-term certainty”.