Mortgage approvals fell by a less than expected 1.9 per cent in the three months ending April 2016, as some 2,307 mortgage applications were approved, signalling perhaps a growing acceptance of the Central Bank’s new mortgage lending rules.
On a three-month moving average basis to end April 2016, the number of mortgage approvals fell again, figures from Banking & Payments Federation Ireland (BPFI) show, but the rate of decline was much slower, down by just 1.9 per cent on a year-on-year basis to 2,307, a significant improvement on the prior month when the decline was of the order of 13.7 per cent. On a monthly basis, mortgage approvals actually rose by 18.7 per cent, the first time volumes have increased month-on-month by more than 1 per cent since July 2015.
Springtime and the launch of several new developments looks to be bringing out the first-time buyers, as the number of approvals for first-time buyers rose by 0.7 per cent to 1,294 at end-April (compared to drop of 15% in three months to end March), for a 23.1 per cent month-on-month increase. FTBs now account for 56 per cent of all mortgage approvals, by number.
The switching market finally looks to be coming to life, as consumers, encouraged perhaps by falling mortgage rates at some institutions, opt to re-mortgage in greater numbers. In the three months to end April, switching activity rose by 76.6 per cent, up to 136 switches in the month, from 77 in April 2015. Switches accounted for about 6 per cent of all mortgage approval activity in the period.
The value of mortgages rose by 0.2 per cent year-on-year to €443 million, compared with a decline of 14 per cent at end March 2016, or by 19.7 per cent from March.
David McNamara of Davy Stockbrokers said the figures point to an "exceptionally strong month" while Investec is now forecasting total mortgage drawdowns of € 5.5 billion in 2016, up by a hefty 12 per cent on 2015, although analyst John Cronin notes that this is " still extremely low in a long-term historical average context".
One section of the market that is still declining however is those looking to trade-up.Restricted perhaps by negative equity or the difficulty in saving a 20 per cent deposit in the capital, approvals in this category slumped by 13.8 per cent in the year to April 2016, with just 623 approvals in the three month period.
Mortgage value
The average value of a mortgage approved rose by 2.1 per cent year-on-year to € 197,343 in the three months ending April 2016.
“That is the highest level on record since the series began in 2011, reflecting strong employment and wage growth, allowing banks to increase lending levels while staying within the Central Bank’s mortgage lending rules,” Mr McNamara said.
Housing supply
In a separate report, BPFI’s economist and head of accounting & tax Ali Ugur points to a notable increase seen in housing activity, specifically the rise in housing commencements, completions and planning applications.
In the first quarter of 2016, housing completions rose by 20 per cent, which would equate to a full-year total of about 15,000 units (below estimated demand of 25,000), while housing commencements also rose, up by 57 per cent on the year. If this trend continued, the total outturn for 2016 would come to about 20,000.
However Mr Ugur cautioned that housing supply will still fall significantly short of estimated demand. The report also shows that cash is still playing a significant part in sales. In the first quarter, BPFI figures show that cash accounted for 47 per cent of all transactions, compared with an estimated 35 per cent in the UK, according to the Council for Mortgage Lenders. But there are significant regional variations, with with cash sales accounting for a high of 75 per cent of all transactions in county Leitrim and a low of around 29 per cent in county Kildare. In Dublin, cash sales accounted for about 37 per cent of all transactions in the first quarter of 2016 compared to around 40 per cent in Q1 2013.
