Mortgage lending will increase strongly again in 2004, but the rate of growth in house prices will slow down, according to Permanent TSB.
The Republic's biggest lender said yesterday that it expected house prices to rise by 8 per cent this year, compared to growth of around 13 per cent in 2003.
At the Irish Life & Permanent Group's briefing on the outlook for the year ahead, Permanent TSB said the number of mortgage applications in the pipeline going into 2004 had increased by 12 per cent on this time last year, with approvals up by 20 per cent.
The lender announced it is to enter the tracker mortgage market with a loan that will track the European Central Bank (ECB) base interest rate at a margin of 1.1 per cent on amounts of more than €250,000.
This means Permanent TSB is now the most competitive mortgage provider for variable rate loans of this size above 60 per cent of the purchase price.
The margin over the ECB rate on smaller loans is 1.4 per cent.
Over a third of mortgage demand comes from first-time buyers, with investors accounting for 15 per cent.
Second-time buyers now account for half of all mortgage lending at the bank. This figure includes equity release lending to customers who use the security of their home to borrow at low rates to pay for consumer items.
An aggressive approach to capturing current account business in 2003 paid off, the bank said.
The introduction of an account switching service and free banking for mortgage customers and customers with an average balance of at least €1,000 led to three times the number of quality current accounts being opened in 2003 compared to 2002. Quality accounts are those where a salary is sent electronically to the account.
Meanwhile, Irish Life said strong pensions sales in the second half of 2003 helped rescue the performance of life assurance and pensions business after a very difficult first half. However, it criticised the Government's spending level on pensions awareness.
Irish Life estimates that the total spend on the advertising of Personal Retirement Savings Accounts (PRSAs) by providers in 2003 was €2.6 million, compared to the Government's budget of €500,000 for its pensions awareness campaign.
"Really the Government needs to be spending multiples of that," said Ms Dervla Tomlin, head of marketing for Irish Life, which claims a 40 per cent share of the PRSA market.
The chief executive of Irish Life - Retail, Mr Denis Casey, compared the visibility of the pensions campaign with the Government's "very persuasive" and "unavoidable" advertising on food safety. "It just seems to us to be completely out of kilter," he said.
Irish Life expects more investors to return to equities in 2004 However demand for capital guaranteed products is expected to continue strongly after a 25 per cent growth in sales last year.
Mr Eugene Kiernan, head of asset allocation at Irish Life Investment Managers (ILIM), said the company was optimistic that there would be further recovery in each of the major investment markets in 2004.
"All the indicators are that we are looking at a further strong performance this year. Business confidence is growing, the key drivers of economic performance are positive and the outlook for economic growth in the major economies is positive," he said.
Mr Kiernan said ILIM believed 2004 would be positive for equities, despite the risk of terrorist attacks. Interest rates were "very much in the comfort zone" and would only drift up by about a quarter of a percentage point near the end of the year, he said.
