Loan approvals are on the rise, writes ISABEL MORTON

GOD BLESS them, but really, it would make you wonder as, apparently, it has only recently dawned on our bankers, that it may actually be a good idea to start lending again.

Somehow, somewhere along the line, they became confused about things and forgot that lending was their core business.

At last they’ve figured it out and realise that, if they don’t lend to people to buy property, then property prices will continue to fall and this, in turn, would mean that the value of their loan books would continue to decline.

It’s taken an awfully long time for this little matter to register with them but apparently it now has, according to mortgage brokers interviewed last Sunday.

The brokers report that AIB and Bank of Ireland are approving many more loans this year than they did last year, which wouldn’t be too hard given that only €2.5 billion in mortgages were sold in Ireland in 2011 compared with a peak of €40 billion in 2007.

When Bank of Ireland chief executive Richie Boucher announced that they will be increasing their market share by 50 per cent, it actually means that they will add another €1.5 billion to the lending pot, which is better than nothing but still pathetic when compared with average lending levels.

(Although, having swung so violently from one extreme to the other, few can remember what might be considered as normal lending these days.)

A recent survey by MyHome.iefound that two-thirds of homeowners and more than half of first-time buyers do not believe that financial institutions are lending and that lending institutions are over-regulated and over cautious.

So, where mortgage brokers and estate agents might notice an increase in mortgage approvals, it may not appear immediately apparent to potential property purchasers.

So, why are the banks suddenly deciding to sell more mortgages? Did it really take them this long to realise that, regardless of the high cost of borrowing, they would have to go back to some level of lending?

Or did it eventually dawn on them that it didn’t matter what they did to try to drag capital back into their coffers, it would never be enough to counteract the losses created by rapidly falling property values and the increasing numbers of defaults?

Or was it that some months ago, in an attempt to put a halt to the ongoing drop in property values and encourage transactions, Nama livened up the banks by hinting it might enter the mortgage market?

As the largest property management company in the country, Nama is holding all of the cards and has the ability to become the largest mortgage provider in the country. (Indeed, last week, Nama confirmed it would issue negative equity mortgages, which insure borrowers against further price falls.)

Is it possible, I wonder, that the Government became so frustrated with its banks and the fact they steadfastly lied about the extent to which they were lending into the business and property sectors, that it gave them an ultimatum – if they didn’t start lending to an acceptable level, the Government would court foreign investment and issue licences to international banks to come in and start afresh?

Or perhaps it’s just that the head honchos in our banks have run out of their own savings and need to justify their next bonus payments.

Whatever the reason for the small increase in mortgage lending since the beginning of the year, it is at least giving the property market a lift, however small.

It is possible, of course, that the winds of change may be blowing again, but this time in our favour. As Europe’s star pupil, we could end up being paraded around and held aloft for all to see.

We would be the ideal choice as, in the overall scheme of things, we don’t owe that much money, have a young, educated, English-speaking population and, most importantly, we’ve been subservient, co-operative and well behaved. Europe could hardly wish for a more bovine bankrupt.

So, with any luck we’ll receive the gold star for effort and our prize might be a deferral of debt until we have some real hope of being able to pay it off. In the meanwhile, we remain poised on the starting blocks, ready and waiting for a speedy recovery.

Viewing figures in Dublin have increased; estate agents are looking marginally less depressed; homeowners are no longer embarrassed about extending or renovating (albeit on a tight budget); rents have gone up and there is a shortage of well-located family homes on the sales and letting markets.

In other words, there are small signs of spring appearing, although, after the last five or six years, few would dare to hope that we might ever enjoy a summer again.

Isabel Morton is a property consultant