Getting a mortgage remains a challenge

By Frank Conway

The latest mortgage statistics from the Bank Payments Federation of Ireland reveals there has been a relatively modest rate of growth in mortgage lending through the 2nd quarter of 2018. At a first glance, it looks reasonably healthy.

Irish mortgage lending activity continues to be extremely low

However, when reviewed on a historical basis, mortgage lending in Ireland is extremely low.

If we consider the primary elements of mortgage lending today, while there are five main categories; First Time Buyer (FTB), Second Time Buyer (STB), Buy-to-Let (BTL), Top Up and Switcher, in order to accurately compare current lending statistics to the 1970’s, ‘80’s, 90’s and early part of the 21st Century, we need to strip out the last two of the five categories; Top-Up and Switcher.

On this basis, lending to the FTB, STB and BTL in the first half of 2018 is 13,700. Extrapolating this out for the full year and factoring in an acceleration in mortgage drawdowns at the end of the year, the maximum level of lending to the three primary mortgage categories might reach 36,000 units by year-end. Not bad when compared to the 29,300 mortgages originated in 2017. It would represent a fairly healthy rate of growth…until we look back to the 1980’s.

Mortgage lending statistics provided by Government report lending activity between 1970 and 2006. The BPFI began tracking and reporting mortgage lending from 2003 so there are four years of overlap between the Government and BPFI statistics. When the Government and BPFI figures are compared, they are closely aligned on the primary categories; FTB, STB and BTL. For example, using the BPFI statistics, in 2006, there were 110,790 FTB, STB and BTL mortgages; the Government statistics show 111,253 mortgages were drawn down in 2006.

Comparing the historical data, mortgage lending today compares to the level of lending in the late 1980’s. In 1988, there were 36,800 mortgages drawn down. This at a time when the population of Ireland was 3.5Million, over a million less than today.

So, to put this into context, mortgage lending today is actually lower per household than it was in 1979 when we factor in the total population of Ireland versus the number of mortgages drawn down…assuming we reach 36,000 units this year. Equally, it will match 1989 on an absolute basis.  Regardless of which way the numbers sliced, mortgage lending, despite the year-on-year growth over the past few years remains extremely low.

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