Irish Financial Review

Mortgages on course to hit lowest level since 1971.

The number of mortgages granted for the purchase of property in the first 6 months of 2012 is now lower than was the case for the first six-month period in 2011 and could fall to their lowest level since 1971 if current trends continue.

Based on the figures published by the Irish Banking Federation, a total of 5,855 mortgages were granted during the first half of 2012. This is 14% fewer mortgages than the same period in 2011, where 6,810 mortgages were drawn down.

Equally, when refinance and top-up mortgages are eliminated from the overall figures (since these loans are not actually used to purchase property), a total of 5,050 mortgages were granted in the first 6 for the purpose of buying a property. These loans were given to first time buyers, existing homeowners and those buying investment properties.

If current trends continue, this would result in little over 10,000 mortgages being granted to purchase a property.

First time buyers, existing homeowners and investors are the three segments which the Department of the Environment has tracked mortgage origination since 1970.

If the numbers hold out on their current path, it would result in the lowest number of mortgages being drawn down than at any point since 1971.

Following are the lending statistics for origination 1970 – 2012 (projected)

Year Mortgage Units Data Source
1970 8,929 DOE
1971 11,728 DOE
1972 14,168 DOE
1973 16,286 DOE
1974 18,313 DOE
1975 21,241 DOE
1976 22,051 DOE
1977 22,039 DOE
1978 22,648 DOE
1979 24,742 DOE
1980 26,357 DOE
1981 26,241 DOE
1982 24,113 DOE
1983 27,927 DOE
1984 27,980 DOE
1985 28,060 DOE
1986 27,632 DOE
1987 28,379 DOE
1988 36,939 DOE
1989 38,580 DOE
1990 31,051 DOE
1991 33,720 DOE
1992 42,044 DOE
1993 38,490 DOE
1994 46,483 DOE
1995 47,035 DOE
1996 56,009 DOE
1997 57,901 DOE
1998 61,407 DOE
1999 70,817 DOE
2000 74,258 DOE
2001 66,786 DOE
2002 79,292 DOE
2003 84,749 DOE
2004 98,709 DOE
2005 107,680 DOE
2006 111,253 DOE
2007 84,286 DOE
2008 53,691 DOE
2009 25,172 DOE
2010 18,382 DOE
2011 11,131 DOE
2012 10,100 Projected IBF

Debt crisis: Italians turn to cash-for-gold shops

Italy has seen the number of cash-for-gold shops multiply significantly in recent years as citizens there are forced to sell jewellery to pay bills.  

According to media reports, the Eurispes think-tank estimates that the number of gold-buying shops has quadrupled in the last two years.

As has been happening in Ireland and other countries, citizens in Italy are finding the ongoing austerity programmes is resulting in less and less money to pay basis bills. Buying gold has become one of the boom industries.

It is estimated that there is an estimated 28,000 “cash for gold” outlets in Italy, according to Gianni Mancuso, one of six centre-right MPs who last month presented a request in parliament for the government to regulate the sector more strictly.

As with many growth sectors, the Government in Italy is now looking at how it will regulate the industry there…a codeword for how it plans to generate additional tax.

Tesco offers mortgages in the UK

Tesco Bank, part of the retailing giant that carries the same name has announced that it is to begin offering mortgages for the first time in the UK. Its foray into the mortgage world is likely to be as timid as an injured athlete returning to training for the first time. Conservative lending will be the order of the day.

The bank, which said it aimed to offer products for the “majority” of its supermarket customers is not going to be offering any mortgages to those with deposits less than 20%, in other words, 80% maximum loan-to-values. This will rule out much of the first time buyer market, where lower deposits tend to be the norm.

“This is a prudent place to start,” said David McCreadie, managing director of Tesco Bank. He acknowledged that Tesco bank currently had no plans to offer mortgages to first-time buyers with smaller deposits, even though he expressed confidence that Tesco Bank is planning a full service that would rival high street banks.

The range of mortgages include two-year, three-year and five-year fixed rates. Mortgage experts in the UK have questioned the Tesco Bank offers and claim they are so uncompetitive, it is unlikely that many consumers would ever end up taking the Tesco Bank loans out.

The entry of Tesco Bank into hard-core lending is likely to continue to be done on a step-by-step basis as the grocery giant learns the complexities and dangers associated with lending. However, it’s entry into the mortgage market should be an interesting exercise that is likely to closely watched by similar operators such as Sainsburys, who also promote their own ‘bank’ services.

Here in Ireland, it is probably safe to say that we are stuck with banks that we already have. With just two lenders, AIB and Bank of Ireland doing minimal levels of lending, other banks continue to lick their wounds on the banking sidelines. A return to mortgage lending is a while away, even if the property market begins to stage a meaningful recovery.

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