Mortgage approvals increase – despite a shortage of property

MORE people are getting approved to take out a mortgage despite the shortage of properties to buy.

New figures show more than 40,000 people got approved for a mortgage in the year up to November. This was up 25pc on the same period last year, according to the Banking and Payments Federation.

People are being forced to borrow more due to the surge in house prices. The average approval amount has jumped by €15,000 to €221,000 in the past year.

First-time buyers are getting approved to borrow €18,600 more this year than a year ago, at an average of €218,000.

This reflects the fact house prices are rising at an annual rate of 12pc.

Almost half of the approvals were for first-time buyers, with mover-purchasers accounting for almost a third.

The value of all mortgages approved in November was €867m, some 15pc higher than the same month in 2016.

That month saw a rise of 7pc in the numbers cleared to take out a mortgage to close to 4,000.

However, this was the slowest rise in the value of new approvals since March 2016.

Based on the latest figures, Owen Callan, analyst with specialist bank Investec, said he now expects mortgages to the value of €7.4bn to be drawn down this year.

Goodbody Stockbrokers’ chief economist Dermot O’Leary said the slowdown in the rate of growth in mortgage approvals in November, compared with the previous year, could be attributed to the fact that last year there were fears of tightening in Central Bank mortgage rules which caused strong growth in applications for mortgages in November last year.

“Overall, this has been a year of strong growth in new mortgage approvals in Ireland, with the number of approvals up by 25pc year on year and the value growing by 36pc year on year,” Mr O’Leary said.

However, he said there is likely to be a paring back in the growth of first-time buyers getting mortgage approval next year due to changes in the Central Bank’s lending rules.

From next year, banks will be able to offer fewer exemptions from the rules.

At present the rules state that borrowers are limited to taking on a mortgage that is no more than three-and-a-half times their income. Banks were able to offer exemptions from this rule for 20pc of all borrowers.

Mr O’Leary said that in the first half of this year 24pc of lending to first-time buyers exceeded the income cap.

The changes coming in next year mean this will be limited to just 20pc of loans to first-time buyers in 2018. This is set to mean fewer exemptions for new buyers. The number of switchers more than doubled between March 2016 and November 2017, increasing to 3,545.