Your MoneyCantillon

Mortgage data tells a sobering tale

Overall figures skewed by switching and obscure the fact that average loan sizes are still on the rise

If central bankers and policymakers wanted evidence that higher interest rates are having an effect on consumer behaviour, mortgage data published this week by Banking and Payments Federation Ireland (BPFI) will have provided it.

Mortgage activity in the State’s housing market fell sharply in February with both the number of home loans approved and the value of mortgages dropping as aspiring homeowners and lenders adjusted to a new climate where interest rates had risen to 3 per cent and there was increasing uncertainty about job security, especially in the tech sector.

And that was before this week’s ECB interest rate rise that brings official rates to 3.5 per cent, with the potential for more to come, though concern over a potential bank crisis is growing.

According to the BPFI, some 3,378 mortgages were approved last month, down 8.6 per cent on the previous month and a whopping 13.3 per cent on the same month last year. The aggregate value of those approvals came to €945 million, down nearly 7 per cent on the previous month and 8.1 per cent in year-on-year terms.


For sure, the significant slowdown in the number of homeowners switching to secure better rates or lock into a fixed rate as ECB rates started rising has played a part. With all lenders having now raised their rates to some degree and the ECB having added 3.5 per cent points to its rates, much of the switching traffic will have been completed by now, with lower volumes to be expected over the coming months.

But there is still a marked pulling in of horns in the wider market. Goodbody economist Dermot O’Leary noted last month that the increase in mortgage loan volumes in January year on year had been the first since the previous May. Much of the froth in the market over that time had come from bigger loan sizes and, of course, the switching market.

On loan size anyway, that remains the case. Despite the dramatic slump in loan volumes and the fall in overall value, the average loan size in February according to the BPFI data was €291,545, 6.7 per cent more than in the same month last year. Perhaps the loosening of Central Bank rule has had some effect.