Strong growth in mortgage approvals and drawdowns continues

There was continued strong growth in both mortgage approvals and drawdowns during the third quarter as homebuyers returned to the market following a steep drop-off last year at the height of the Covid-19 crisis.

The latest data from Banking and Payments Federation Ireland (BPFI), the lobby group for banks, said there were 11,479 mortgage drawdowns in the quarter, valued at €2.8 billion.

Mortgage drawdown activity rose in volume terms by 40.9 per cent year on year and was up 42.3 per cent by value.

There were 9,124 mortgages drawn down to purchase property at a total value of €2.3 billion. This was 43.3 per cent higher on the previous year in number and 45.8 per cent in terms of aggregate value.

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First-time buyers continue to dominate the market, accounting for 6,047 of the loans drawn down, accounting for two-thirds of the total. An additional 2,838 loans were drawn down by people moving home.

Lending for residential investment is also rising substantially in percentage terms, though not as fast as the other two categories, with 239 buy-to-let loans drawn down in the period, a rise of 39 per cent year on year.

By value, the highest increase was among those moving homes, where the sum lent in aggregate was 53.5 per cent ahead of last year. Banks continue to be risk averse on buy to let, with just €34 million lent in this market, compared with €1.5 billion to first-time buyers.

Switching

Away from property purchase, there was a 37.6 per cent rise in the number of people topping up existing mortgages, to 739, with €68 million lent into this section of the market.

The rate of increase in homeowners switching providers to secure better terms or remortgaging their homes continues to lag the market at just under 30 per cent. The value of such business was ahead by 24.9 per per cent on the third quarter of 2020, at €402 million, with 1,616 people looking to switch or remortgage.

The impact of the Covid-19 pandemic restrictions on the construction sector is evident in the market share figures, where newly-built homes accounted for just 26.6 per cent of the loans drawn down. That is a sharp drop from the figure of 37.6 per cent the previous year.

Mortgage drawdowns on second-hand properties grew much faster – at 57.6 per cent by volume and 71.5 per cent by value.

The number of first-time buyers opting for second-hand homes in the third quarter was the highest for that period since 2006.

BPFI chief executive Brian Hayes said the data showed “continued growth in both mortgage approvals and drawdowns”.

“Almost 54,400 mortgages were approved in the 12 months ending September 2021, valued at almost €13.5 billion, suggesting a strong pipeline for future demand as we move into the last quarter of the year,” he said.

Although switching remains a small part of the market, Mr Hayes said the almost 7,000 homeowners who secured approval to switch mortgage in the past 12 months was “the highest annualised level on record”.

“With all residential construction now under way again, the challenge remains how to satisfy the strong demand for housing, clearly evident in today’s figures, with the continued pressure which has been growing on supply,” he added.

Trevor Grant, chairman of the Association of Irish Mortgage Advisors, said the market was the busiest it had been in years.

“While the volume of mortgage applications would traditionally slow down towards the end of the year, the feedback we’re getting from mortgage brokers across the country is that they do not expect the pace to slow to the extent that it usually would in December.

“People have had to hold off with their plans for long enough over the last year and half when faced with restrictions and lockdowns, etc, so it’s understandable that many now feel time is of the essence,” he said.