Mortgage activity increases despite higher borrowing costs

The number and value of mortgages approved in January rose compared with the previous month, defying expectations that higher interest rates would dampen activity.

Figures from the Banking & Payments Federation Ireland (BPFI) show a total of 3,697 mortgages, valued at just more than €1 billion, were approved last month. This was up in both volume and value terms on the previous month. The number of mortgages issues was also up 2.1 per cent on the same period last year.

However, these lenders are borrowing more, with the value of mortgage approvals jumping almost 9 per cent on the same month last year. That means, across the full range of property loans, people were approved for an average mortgage just shy of €275,000, 6.6 per cent more than the €257,400 average in January 2022.

There has been speculation that the current cost-of-living squeeze combined with higher borrowing costs may lead a slowdown in mortgage activity in the State’s housing market. So far the figures remain robust but banks have only begun to raise the rates attached to their loan products, suggesting there may be lag before the impact of these higher costs emerges.

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First-time buyers remain the largest segment in the mortgage market, accounting for more than half of the volume and value of approvals.

Of the €1.01 billion of mortgages approved in January, first-time buyers accounted for €520 million (51.2 per cent) while mover purchasers for €278 million (27.4 per cent).

There were 2,820 purchase mortgage approvals, valued at €810 million in January 2023, up 10 per cent on the same period last year.

There were more than 58,000 mortgage approvals (58,352) in the 12 months ending January 2023, valued at almost €16 billion (€15,935 million).

[ Mortgage holders face higher interest rates than forecast as ECB focuses on inflation ]

“This is the highest value of annualised mortgage approvals since our data series began in 2011 compared with €13.6 billion in the 12 months ending January 2021,” BPFI chief executive Brian Hayes said.

“While the volume of non-purchase mortgages (switching and top-ups) rose by 2.1 per cent, the figures indicate a significant slowdown in this segment from previous periods,” Mr Hayes said.

House price inflation continues to slow in the face of higher interest rates and broader cost-of-living pressures.

The Central Statistics Office’s (CSO) latest Residential Property Price Index shows the annual rate of increase in house prices fell to 7.8 per cent in December. This was down from 8.5 per cent in November and from a height of 15.1 per cent in March 2022.

Year-on-year inflation in Dublin fell to just 6 per cent, down from 7 per cent the previous month, while price growth outside the capital fell to 9.3 per cent, down from 9.8 per cent in November and more than 17 per cent in March.