‘€1bn boom in mortgages as house market bounces back’
ALMOST an extra €1billion will be lent to homebuyers next year as a sharp increase in house building will see the market rebound, a financial forecast predicted yesterday.
Mortgage lending is expected to hit €12.1billion next year, up from €11.2billion this year, and is predicted to reach €14.2billion in 2023.
At the current average house price of €314,000, the extra lending would be enough to buy almost 2,900 more homes.
The funds will be on the back of a strong rise in new homes for sale rather than the value of the average mortgage increasing, which will prevent a property bubble, according to the report by Davy Stockbrokers.
While recovering strongly, the total value of mortgages are way below their peak in 2006 when lending hit an astonishing €40billion.
The report released yesterday said: ‘Irish housing starts have accelerated dramatically to 29,565 in August, beating expectations and leading us to revise our forecast for completions to 29,000 in 2022.
‘There has also been an element of catch-up as some of the caution in mortgage lending in 2020 has unwound in 2021. Hence, we have revised our forecast for Irish mortgage lending... This higher level of homebuilding will help mortgage-lending.’
However, Davy does not expect the Central Bank mortgage-lending review to lead to any loosening of its rules limiting most buyers to loans of 3.5 times their salary and a maximum loan of 80% of the value of the property.
The Davy forecast said: ‘The potential inflationary impact of higher leverage was a key critique by the Central Bank of Ireland of the new equity loan scheme and led to price caps being imposed on the scheme.
‘Also, recent comments from Deputy Governor Sharon Donnery and research published by the CBI argue against loosening the loan-toincome (LTI) and loan-to-value (LTV) regulatory thresholds.’
Prices are up almost 11% year-onyear, currently the fastest rate in more than three years.
The report added: ‘The new Housing for All strategy is clearly aimed at stimulating homebuilding.
‘The key initiative is the equity loan scheme, providing funding of up to 20% of the purchase price, effectively allowing leverage up to 4.5 times income for first-time buyers of newly-built homes from 2022.
‘However, the strategy also includes measures to expedite planning and invest in Irish Water and infrastructure to help housing development.’