Mortgage drawdowns up in third quarter but pace slows

The volume of new mortgage lending is falling year on year, according to the latest figures from the Banking and Payments Federation. However, the data reveals an increase in the number of mortgages drawn down between July and September of this year.

The figures show that the volume of new lending was up 15.6 per cent year on year in the third quarter. This is down considerably from a 30 per cent annual increase in the second quarter and a 64 per cent year on year rise for the first three months of 2015.

The data indicate that the number of mortgages drawn down from July to September rose 15.6 per cent compared to the same period a year earlier and were up 16.7 per cent compared to the preceding three months.

A total of 7,292 loans, valued at €1.33 billion, were drawn down by borrowers from July to September. This marks a 22.7 per cent value increase on the second quarter and was 18.1 per cent higher than for the same three months in 2014.

First-time buyer, mover purchase and residential investment letting volumes rose to their highest third-quarter levels since 2009, the figures show.

The value of new lending to first-time buyers was up 16 per cent in the thid quarter, compared to an increase of 39 per cent in the preceding three months. First-time buyer loans accounted for 50.4 per cent of all loans drawn down from July to September.

Re-mortgage volumes

Re-mortgage volumes rose by 25 per cent compared to the second quarter and were up 138 per cent year-on-year, the data shows.

The average loan size increased to €182,406 in the third quarter, up 2.2 per cent on the same period a year earlier and rising for the ninth successive quarter. The average mortgage drawn down for property purchase increased on a year-on-year basis, up 1.6 per cent to €189,707.

“In terms of where new lending goes from here, the mortgage approvals trends suggest a further slowdown over the coming quarters. In September, the volume of approvals for house purchase fell by 3 per cent year-on-year, with the value flat. This is somewhat better than the August outturn, but taking the third quarter overall, the volume and value is effectively unchanged on the previous year,” said chief economist Dermot O’Leary.

Davy said households are being prevented from increasing their leverage by stretched affordability and the Central Bank’s lending rules.

"Understandably, attention has focused on the Central Bank's lending rules - preventing households from increasing their leverage. However, the bigger picture is that lending opportunities are being held back by weak home building. Housing completions in the year to September were 8,914, up just 14 per cent on 2014...homebuilding in 2015 will be well below 13,000 units and the 25,000 necessary to satiate demographic demand," said Davy economist Conall Mac Coille.

Additional Banking and Payments Federation figures show a total of 2,683 mortgages were approved per month, on average, in the three months ending September 30th, of which 2,348, or 88 per cent were for house purchase.

The number of mortgages approved rose by 3.7 per cent year-on-year but fell by 1 per cent month-on-month.

The value of mortgages approved per month, on average, in the third quarter was €499 million, of which €460 million or 92 per cent was for house purchase.

The value of mortgage approvals increased by 6.4 per cent year-on-year and fell by 3.1 per cent month-on-month.