Home loans rise... but building stalls

ENOUGH mortgages were taken out in a single month to buy more than 2,500 homes, figures released yesterday show.

New mortgages totalled €780million in September, bringing new loans to €6.1billion over the first nine months of the year, an increase of 12% on the same period last year, according to the Central Bank.

But despite the strong demand this year and severe shortage of properties for sale or for rent, separate figures show new house-building in Dublin stalled in the second quarter of 2019.

At the average property price of just over €305,000, the amount borrowed in September would buy 2,554 homes.

Borrowers are increasingly opting for fixed deals and the Central Bank figures show 74% of new loans were on fixed rates.

But Irish borrowers are still paying the second-highest rates in the euro area just behind Greece, although average rates have come down.

The average interest rate on new fixed-rate mortgage agreements stood at 2.86% in September. New fixed-rate agreements averaged 2.91% over the 12 Noticed trends: Rachel McGovern months to September. Brokers Ireland said Irish mortgage-holders are paying 1.55% more than the euro area average – 2.96% versus 1.41% – which is costing them €235.90 more every month on a €300,000 mortgage over 30 years, which is €85,000 over the lifetime of the mortgage.

Brokers Ireland financial services director Rachel McGovern said: ‘Small percentages amount to a massive sum over the lifetime of a mortgage. And this is money foregone that could otherwise be put towards children’s education into the future, or pension planning.’ The fact that almost three quarters of buyers are now opting for fixed rates shows consumers are seeking greater security, she said.

‘And the reality is they deserve more. As we’ve always maintained, there is no reason why Irish mortgage holders should not enjoy long-term fixed interest rates of 20 years or more, like their European counterparts. Mortgages are products for which lenders can borrow long term knowing their profit margins. It demonstrates the need for greater competition,’ she said.

It comes as a report by the Dublin Economic Monitor (DEM) said housing completions in the capital fell by nearly 14% to 1,628 in the second quarter of 2019 – the first fall since 2015.

The DEM also reported that building commencement notices fell by 18.5% during the second quarter of this year.

‘This may have negative implications in the future for completions growth,’ the DEM report said.

Property prices in Dublin are down by 0.3% in the past year, , according to the latest official figures, while they are up just 2% nationally in the year to August. This compares to a rise of 8.9% in the 12 months to August last year.