Value of mortgage drawdowns rose 20% to €8.7bn last year

The value of mortgages taken out in Ireland last year rose nearly 20 per cent to €8.7 billion, with first-time buyers representing the biggest segment of the market.

Figures from the Banking and Payments Federation of Ireland show that some 40,203 mortgages with a value of €8.7 billion were drawn down in 2018. In value terms this was €1.4 billion more than the previous year.

Analysts had originally expected the Irish mortgage market to expand to more than €9 billion last year but lowered their expectations as the Central Bank’s mortgage lending rules restricted the market. This contributed to the decline in the value of Irish banking stocks last year .

“Almost half of this was by first-time buyers, by far the single largest segment of the market,” said Felix O’Regan, the federation’s director of public affairs.

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“Growth was evident across all market segments but particularly among those switching mortgages and first-time buyers.”

The figures show that during 2018, a total of 45,656 mortgages, worth about €10.1 billion, were approved. However, the year-end numbers indicated a slowdown in approval activity in the fourth quarter.

Mortgages approved in December were valued at €656 million, of which first-time buyers accounted for €301 million, or 46 per cent. Mover buyers accounted for €220 million, or 34 per cent of the total.

Outlook for 2019

The overall figures represented a 9.6 per cent rise year on year but a 27 per cent decline month on month.

“While end-of-year approval activity showed some sign of slowdown due to seasonal factors, the indications are that 2019 will see continued growth in mortgage drawdown activity,” Mr O’Regan said.

The figures show that in December first-time buyer mortgage approval volumes fell by 2.4 per cent year on year to 1,363, while mover approval volumes increased 5.6 per cent year on year to 829.

Residential investment letting mortgage approval volumes decreased 16 per cent year on year to 100.

Goodbody chief economist Dermot O’Leary said that a normal market would see about €14 billion in mortgage drawdowns. This year, he said growth of 16 per cent to about €10 billion of drawdowns is expected.

A recent report by the the Economic and Social Research Institute warned that big increases in housing activity in the past have been associated with large increases in lending by banks, which posed the risk of another credit bubble forming .

While the Central Bank’s lending rules limit what individuals can borrow, the overall stock of credit has been rising steadily.

Separate Central Bank figures show household debt as a percentage of disposable income is now at its lowest level since 2004.

Despite the improvement, Irish households remain the fourth most indebted in the EU.