THE VALUE of new mortgages advanced in the three months to June dropped 13 per cent, bringing the decline for the first half of this year to 16 per cent, new figures reveal.
Tighter lending rules and declining demand amid falling property prices and higher bank funding costs have brought activity in the mortgage market in value terms below levels last recorded in 2005, according to statistics pooled by the State's mortgage lenders.
Just over 35,000 new mortgages worth €7.5 billion were advanced in the second quarter of the year, compared with 41,000 mortgages worth €8.7 billion during the same period last year.
Some 63,000 new mortgages totalling €13.8 billion were advanced in the first half of this year compared with 79,000 worth €16.5 billion during the first six months of 2007.
The first-time buyer and trading-up sectors of the mortgage market showed the biggest declines in the first six months as nearly all lenders raised interest rates and changed their rules, seeking large cash deposits from new borrowers.
However, the rate of decline on first-time mortgages slowed in the second quarter compared with the first three months.
The first-time mortgage market is down 28 per cent in the first half of the year on last year, while the trading up share of the market fell 26 per cent.
Although the market is traditionally quieter in the first quarter, the value and number of new mortgages rose in the second quarter compared with the first three months of the year.
These latest mortgage statistics are likely to be confirmed in the coming weeks when the Irish Banking Federation and accounting firm PricewaterhouseCoopers (PwC) publish their official report for the second quarter of the year.
Banks and building societies advanced 28,500 mortgages worth €6.2 billion in the first three months of the year, down 19.7 per cent in value terms on last year.
Lenders have raised interest rates on fixed, standard variable and new tracker mortgages over the last six months, passing on to customers the higher cost of borrowing money in the international money markets due to the credit crisis.
Switcher mortgages, or the remortgaging segment of the market, continued to be the only part of the market to show an increase in lending in the three months to June.
The value of the remortgage market rose 19 per cent in the first six months of the year as lenders offered better value deals to attract less risky borrowers with low mortgages on their properties.
The value of new mortgages has been falling since the market peaked in the third quarter of 2006.
The mortgage market is estimated to have slowed further since the end of June as lenders have continued to introduce changes to their mortgage businesses, increasing their restrictions further.
IIB Bank, the fifth largest mortgage lender in the State, told brokers on Friday that from today it would only count 80 per cent of the gross basic salary of property developers, builders, auctioneers, architects and others in the construction sector when approving new mortgages.
It is also capping mortgages on residential investment properties at 80 per cent of the value of houses in Dublin and 70 per cent of the value of Dublin houses and apartments on refinancing mortgages.
It has also limited new residential mortgages for investors to 70 per cent on houses in regional towns and capped new and refinancing mortgages for investment properties to 60 per cent of the value of apartments in the towns.
