Numbers getting mortgage approval falls by 8% in year to March

The number of potential property buyers seeking mortgage approval fell by 8 per cent in the year to March, as a combination of the bad weather, tighter mortgage lending rules, reduced supply and a “tough comparison” with 2017 saw figures decline.

Davy Stockbrokers recently predicted mortgage lending would rise by 26 per cent to € 9.2 billion this year.

According to figures published on Monday by the Banking and Payments Federation, the value of mortgage approvals fell by 3 per cent in the year to March 2018, down to €763 million, and on a volume basis, were down by 8 per cent on the year, to 3,374. However Dermot O’Leary, economist with Goobody Stockbrokers, cautions that there is a “very tough comparison” with last year, when approvals soared by some 77 per cent in the first quarter, and that when looked at on a two-year change basis, approvals growth may have accelerated.

The number of first-time buyers receiving approval fell by 11 per cent in the year to March, although the value of these approvals declined by just 4.4 per cent, on the back of stronger property prices.

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According to Mr O’Leary, a reason for the fall-off in FTB applications could be tweaks to the macro-prudential rules in Ireland at the start of the year. These tightened credit standards somewhat for FTBs, only allowing one in five applicants avail of an income multiple of more than 3.5 times their income, down from 25 per cent last year.

Approvals for trader-uppers also fell (-16.5 per cent) as did those for investors (-21.8 per cent). However, there is a marked increase in switchers (+50.5 per cent) albeit off a low base, as homeowners seek to lock into more competitive rates with a different lender.

Drawdowns

Lagging approvals are mortgage drawdowns, and these continue to grow strongly. The value of mortgages drawn down in the first three months of the year grew by 22.4 per cent to €1,704 million – almost matching the same level of growth in the last quarter of 2017 – with the number of mortgages drawn down up by 13.5 per cent to 7,879.

Again, remortgaging and people switching was the fastest growing element, up by almost 60 per cent on the year, on the back of growing competition for mortgage rates, and higher property prices leaving people with the possibility of releasing equity. According to Mr O’Leary, at 13 per cent of new lending, remortgaging is now at the highest level since 2009.

First-time buyer drawdowns also grew sharply, up by 16 per cent by volume, as did investors (+13 per cent). However, trader uppers appear constrained, with growth of just 0.4 per cent when looked at by numbers.

“Lack of available stock remains the major issue holding back faster growth in mover-purchaser mortgages,” Mr O’Leary said.