The Irish mortgage market continues to be extremely weak. This is based on a detailed analysis of mortgage lending statistics published by the Irish Banking Federation for H1, 2014.
On a statistical level, the latest figures look promising; lending is growing. But all is not as well.
On review of the actual number of mortgage units for a house purchase, activity is very low. For this measure, I only use three of the five mortgage categories listed by the IBF, which are first time buyers, second time buyers and investment property mortgages (I omit top-up loans and switcher mortgages).
Combining the 1st and 2nd Quarter figures, a total of 7,463 mortgage units have been completed.
Comparing the combined 1st and 2nd Quarters of 2013 to those of 2014 reveals a significant rate of growth, but such a comparison would be wrong since Q1, 2013 was a mortgage washout following the ending of Mortgage Interest Relief (MIR) in 2012, which ‘sucked’ a lot of additional mortgage business out of Q1, 2013.
A fairer and more reliable comparison would be Q2 and Q3 2013 with Q1 and Q2 of this year. Doing so reveals a more reliable growth trend.
Where all of this is going is what can we expect to see in terms of total lending for house purchases in 2014.
At a very minimum, if the best lenders can do is continue their current rate of mortgage lending growth, we should see in the region of 15,000 – 18,000 mortgages drawn (for house purchases) during 2014. Not too shabby when one considers that at the end of 2011, total units were barely more than 11,000.
But lets say lenders do reach the 18,000 mark, how does that compare to past years?
The answer is a little disheartening.
18,000 mortgage units for home purchase takes us all the way back to 1974, when a total of 18,313 units were originated.
Too Few Lenders
The real problem in the current mortgage market is that of too few lenders. AIB and Bank of Ireland are the dominant players, lending up to 92% of the value of the property. Beyond that, other mortgage participants are active, but much less so with some still hampered by severe mortgage arrears.
The ongoing ‘recovery’ in the Dublin property market is based on the narrow limitations of a significant cash audience. For a more sustained and broader recovery to take hold, we need a more robust mortgage market.