Mortgage lending dips 37% to end September

NEW MORTGAGE lending fell 37 per cent in the first nine months of 2008 on the same period last year as falling property prices and tighter borrowing rules deterred buyers, according to the latest survey of the market by the Irish Banking Federation (IBF) and PricewaterhouseCoopers.

Lenders recorded the steepest decline in new mortgages since the survey began in 2005 as the value of loans fell to their lowest level in more than three years. New mortgage lending fell below levels recorded in the first three months of 2005, the first quarter covered by the survey.

The value of new mortgage lending in the third quarter declined to €5.6 billion from €8.9 billion in the same period last year. Lending peaked at €10.9 billion in the third quarter of 2006. New mortgages to buy-to-let and residential property investors showed the sharpest decline in the third quarter, falling 46 per cent from a year ago in terms of the value of loans. Mover-purchaser mortgages slipped 37 per cent and re-mortgage loans dropped 36 per cent in the third quarter on last year.

Mortgages to first-time buyers slowed, but not as sharply as the other segments of the market. The value of first-time mortgages fell 31.8 per cent in the third quarter. This was the second-biggest decline in the survey's history for this segment, although first-time buyers increased to a record 23.3 per cent share of the market.

Top-up mortgages showed the smallest decline in the third quarter, falling 30.7 per cent.

Pat Farrell, IBF chief executive, said that mover-purchasers also increased their share of the mortgage market in the third quarter, while the share held by residential property investors and re-mortgaging borrowers fell. He said this showed that the market was "viewed less favourably by speculative investors".

Reduced demand for mortgages - driven by weaker consumer sentiment and declining property prices - was the primary driver in the lower level of lending rather than tighter credit rules. "It is a reflection of where we are at economically and where consumer sentiment is at," Mr Farrell said.

The number of new mortgages has been falling over the course of the year in value terms. New mortgage lending fell 20 per cent year-on-year in the first quarter and 13 per cent in the second.

Some 91,599 mortgages, valued at €19.5 billion, were issued in the first nine months of this year, compared with 120,000, worth €25.5 billion, in the same period last year. The total of 27,937 new mortgages issued in the third quarter was down 32 per cent from a year ago. This compared with a 25 per cent fall in the first quarter. The average loan size fell 6 per cent to €203,000 in the third quarter from €215,000 in the previous three-month period.

Davy Stockbrokers said in a research note that it was "not impossible" that the national mortgage book could shrink next year. For this to occur, new lending would need to fall by more than 40 per cent and the current fast rate of decline in loan repayments would need to remain unchanged, the firm said.