Mortgage activity continues to bounce back, says BPFI

The mortgage market is moving again, albeit at a muted pace, with mortgage drawdowns growing strongly in the second quarter of the year, according to figures published on Tuesday.

The Banking & Payments Federation Ireland (BPFI) figures show that 6,803 mortgages, to a value of €1.29 billion, were drawn down in the second quarter of 2016, an increase of 24.9 per cent in volume and 28.8 per cent in value compared with the first quarter of the year.

It is the highest second quarter drawdown figure since 2010. On an annual basis, the number of mortgages drawn down rose by 11.2 per cent from the second quarter of 2015, while the value jumped by 17.9 per cent.

Dermot O’Leary, economist with Goodbody Stockbrokers, says that the figures suggest that the “hangover following the introduction of the macro-prudential rules is wearing off, with good momentum going into the second half of 2016”.

First-time buyers (FTBs) are still the largest group, accounting for 48.5 per cent of all drawdowns and 46.9 per cent by value. However their share of the mortgage market is declining – FTBs accounted for more than 53 per cent of the market (by number) in Q2 2015. Together, FTBs and mover purchasers accounted for almost 86 per cent of the total value of mortgages drawn down in Q2 2016, as investors main absent – just 317 investment mortgages were approved during the period, although this is an upward trend.

The figures also indicate how property prices have held up, with the average FTB and mover-purchase mortgage up by about €30,000 in the past three years to the highest since Q1 2011. Cash buyers remain dominant and, according to O’Leary, accounted for 47 per cent of transactions in the second quarter.

On the switching front activity remained muted, with just 493 loans remortgaged at a value of €108 million in the second quarter. However the trend is rising, with the number of remortgaged loans up by 75.4 per cent year-on-year, while the value advanced by 62.3 per cent.

Despite the growth, Rachel McGovern, chief operations officer at brokers group PIBA, says the market remains “dysfunctional” almost a decade on from the financial crisis. The combination of ill-timed and excessive mortgage lending rules and a dearth of suitable properties in urban areas in particular is squeezing out first-time buyers and indeed second-time buyers, many with young children, who are trapped in unsuitable accommodation,” she says.

Approvals Indicating potential drawdown trends, the BPFI's figures for mortgage approvals for June show that some 3,140 mortgages were approved a month, on average, in the three months ending June 2016, up by 22.4 per cent year-on-year, and up by 16.9 per cent month-on-month. FTB accounted for almost half of these approvals, and trader-uppers made up a third.

And, while switching drawdown figures remain muted, approval figures show that remortgages almost doubled in volume year-on-year (albeit from a low base), and account for 7.4 per cent of mortgages approved, as consumers wake up to the more competitive market for interest rates.