New data from the Banking and Payments Federation Ireland (BPFI) shows that mortgage approvals fell by 9.2% in August following a record high in July, but continued to show growth year on year, especially for first-time buyers’ mortgages.
Mortgage approvals rose by 18% in August 2021 compared with the same month last year.
The figures show that almost €13.4bn in mortgages were approved in the 12 months ending August 2021, amounting to 54,208 mortgage approvals when using annualised figures, which give a more accurate assessment of emerging key trends.
The annualised figures reached new highs in all categories such as first-time buyers, mover purchase and re-mortgage or switchers.
In August, a total of 4,572 mortgages were approved, valued at €1.16bn.
First-time buyers made up more than half of this at 53.8% of the total volume (€622m), while mover purchasers accounted for just over one quarter at 25.8%.(€351m).
Despite the pandemic, there has been a surge in mortgages, perhaps due to the growth in savings and low interest rates, resulting in increased interest in home buying.
All of these figures suggest a robust pipeline for draw-down activity later in the year, despite the lack of supply and increasing demand.
Housing market monitor
The most recent housing market monitor Q2 2021, published in early September by the BPFI, showed housing activity is increasing significantly, with a strong pipeline of housing supply and mortgage demand indicating strong growth potential.
The monitor (published quarterly) also highlighted a shift in construction activity away from Dublin, as builders focus more on other regions, especially the Dublin commuter belt.
BPFI CEO Brian Hayes said: "The recovery of the residential construction sector continued with the removal of the pandemic-related restrictions on activity in the sector from May 2021.
"The total number of completions in the first half of 2021 stood at 8,955, which was around 10% higher compared with the same period in 2020.
"If the sector continues to build at the same rate as the second half of 2020, it is likely that total completions in 2021 can reach 22,000 units.
"The shift in construction activity towards outside Dublin is evident from the sale of new properties, where about 36% of market property transactions were in the Dublin commuter region during the first half of 2021," he said.
New data from the Central Statistics Office (CSO) showed annual house price inflation jumped to 8.6% in July, the fastest level of growth seen in the market in almost three years.
Government policy may need to change, housing is a critical issue.
The Central Bank of Ireland is currently conducting its annual review of mortgage lending limits.
Government policies have made housing unaffordable for people on moderate incomes. A limit of 3.5 times gross annual income plus a maximum 90% loan to value for a principal dwelling house (PDH) is the current policy for first time buyers.
Lenders have a limited amount of discretion when it comes to these limits in assessing mortgage applications.
Anyone taking on too much debt will end up with serious problems, as we saw after the last crash.
Even today, we have circa 30,000 families in arrears in excess of 90 days and it's more than 10 years since the crash.
Is the cost of houses too high, is government policy too restrictive, or is it just plain fact - there is a lack of supply of new affordable homes and the build costs are just too high.
Overall, Government policy may need to change, but more so with regard to items such aS VAT for first-time buyers (currently 13.5%), or the cost of buying land, rather than changing the lending limits.
There is no doubt, housing remains a critical issue - economically and politically.