A perception of difference on mortgage approvals and consumer debt

There are two sets of what appear to be conflicting reports published on debt and mortgages today.

First, the Central Bank. It produced a report that shows the level of outstanding debt in Ireland continues to decline.

Second, the Irish Banking Federation produced a report that shows the number of mortgages approved in March rose compared to February.

The Central Bank figures should not a surprise. Loan pay-down rates take place at a natural, pre-set level in line with loan repayment schedules, be they personal loans, car finance loans or mortgages. Only arrears will negatively impact this.

On the other hand, the low-level of mortgage approvals has to be a disappointment for lenders, many of who anticipated a significant increase in their own lending during 2013.

But the low-level of mortgage approvals are likely to be as a result of a variety of factors, including demand from consumers as well as other major influencing factors such as a poor labour market, a declining property market (albeit a rate of decline that may be slowing), property taxes…and the ending of mortgage interest relief.

It is difficult to project forward based on first quarter statistics but the low level of approvals to date leaves a lot of ground to be made up in the coming months. Mortgage lenders will be very aware of the resources they will need to have on standby to meet their own lending targets for 2013.

For now, in the absence of significant lending, debt pay-down will remain the only game in town.

 

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